Cinven is set to become the latest private equity house to test the UK fitness and leisure market, as it prepares a £370m public-to-private offer for struggling fitness club operator Fitness First.
In November, Fitness First said that it had instructed Investec and Dresdner Kleinwort Wasserstein to investigate options for a sale of the company in the light of declining profits. At the time no offers had been made, although it was reported that HgCapital was a possible buyer.
Cinven is expected to back Mike Balfour, the company’s founder and chief executive who founded the company in the early 1990s. The Times newspaper reported that Cinven was preparing a 200 pence per share offer, equating to a 20 per cent premium to the current share price and valuing the company at £240m. Cinven would also assume company debt of £130m.
The private equity house has so far declined to comment on the reports.
Fitness First operates over 300 sites worldwide and plans to open a further 50 clubs in the coming financial year, although this figures has been revised downwards from an original target of 80.
Announcement of a deal is not expected imminently, as Cinven and other interested private equity parties, thought to include HgCapital, Apax Partners and Electra Partners, await details of the Fitness First’s membership rates for January, which typically sees the highest levels of new memberships.
Fitness First is the latest publicly-listed fitness chain in the UK to be courted by buyout investors in the past 18 months, principally the result of depressed sentiment towards what many institutions consider a saturated market. Consolidation in the sector is being led almost exclusively by private equity firms, which over the past six months have been particularly active.
Most recently speculation centred around a possible bid for UK operator Holmes Place from Bridgepoint Capital, which already owns a 55 per cent stake in Virgin Active. Earlier this year, Duke Street Capital acquired Esporta in a £140m deal, subsequently merging the business with Invicta Leisure, which it acquired from Electra Partners.