Bridgepoint Capital, the UK-based European mid-market private equity firm, has reached agreement with managers at struggling fitness chain Holmes Place over a take-private deal that will value the business at £56m.
The offer is likely to be pitched at around 55 pence per share, according to a report in the Independent on Sunday. Bridgepoint made an initial offer for the business last July that valued Holmes at £177m, more than three times the current offer.
Following Bridgepoint’s indicative offer last year, rival fitness operator Cannon’s, owned by Royal Bank Private Equity, submitted a £203m offer, which was later withdrawn due to Holmes Place’s worse-than-expected performance figures. Bridgepoint Capital and Holmes Place have been in exclusive talks since January.
In February, Holmes Place confirmed that its 2002 results were likely to be “significantly below” expectations, the result of a dip in new memberships and an increase in competition at its London locations. 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.
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.
Holmes Place operates around 50 clubs in the UK with a further 17 based in continental Europe. In 2001 and 2002 the group opened a total of 19 clubs with a further eleven planned for this year. Holmes is currently trading at 42.5 pence, against a 1999 high of 372 pence.