Bridgepoint Capital, the UK private equity firm that for the past twelve months has been looking to take Holmes Place private, having exited the business via an IPO in 1997, has now opted to make a joint offer for the listed UK fitness chain with fellow private equity firm Permira.
Having received an indicative offer of 175 pence per share from Bridgepoint in July last year, the latest offer is likely to value the business at between 40 and 50 pence per share. In the past twelve months, Holmes Place has suffered from a series of profit warnings, the result of a dip in new memberships and an increase in competition at its London locations.
The offer is thought most likely to be made at 46.5 pence, valuing Holmes Place at £47m. The Bridgepoint / Permira offer will also assume debt of around £180m. Confirmation of the deal is expected within the next two weeks.
In February, Holmes Place confirmed that its 2002 results were likely to be “significantly below” expectations. In the first six months of 2002, Holmes Place announced flat pre-tax profits of £6.7m despite a 28 per cent increase in turnover. The company has also twice breached banking covenants and there are fears that a failure to reach agreement over the acquisition could result in the group’s collapse.
According to a report in The Times newspaper, Bridgepoint has brought in Permira in order to dilute its exposure to the health club sector. It already has a 55 per cent stake in Virgin Active, which it acquired. The bulk of the debt funding for the deal will be provided by Holmes Place’s existing bankers, Lloyds TSB and Royal Bank of Scotland.
For Bridgepoint, a deal would be the second time the private equity firm has invested in the fitness chain. In 1996, Bridgepoint invested £6m in Holmes Place, which it used to acquire and develop prime leisure sites in the London area. The company was subsequently floated on the London Stock Exchange at the end of 1997 at a market capitalisation of £95m.