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CVC nets 2x on Virgin Active

SA investment firm Brait has picked up an 80% stake from CVC and Virgin Group in a deal valuing the gym chain at £1.3 billion

Buyout firm CVC Capital Partners has agreed to offload its controlling stake in gym and health club operator Virgin Active to South Africa-based investment company Brait in a deal valuing the chain at £1.3 billion (€1.8 billion; $1.95 billion).

The transaction will see CVC sell all of its shareholding and Virgin Group sell part of its shareholding, after which Brait will own 80 percent of the company, with Virgin Group retaining a 20 percent stake. The existing management team will be retained and will reinvest alongside Brait, according to a statement from CVC.

It is understood that the deal will generate a 2x return for CVC and an internal rate of return in the high 20s.

CVC picked up a 51 percent stake in Virgin Active in 2011 in a deal valuing the business at around £880 million (€1.2 billion; $1.3 billion), investing from its €10.75 billion CVC European Equity Partners V, a 2008 vintage. At the time the firm funded the deal solely using equity, Private Equity International reported.

Brait, owned by South African billionaire Christo Wiese, is listed on the Luxembourg and Johannesburg stock exchanges. On Friday morning (17 April) Brait’s shares were valued at ZAR 90 (€6.97; $7.54)on the Johannesburg Stock Exchange, giving it a market capitalisation of ZAR 46.48 billion (€360 million; $389 million).

Virgin Active operates 267 clubs across nine countries, serving 1.3 million adult members. It has a strong presence in the South African market, with 114 clubs. The chain has also expanded into Asian markets, opening clubs in Singapore and Bangkok over the last two years.

“Virgin Active is a business that we have tracked for many years, and we welcome the opportunity to invest in the company,” John Gnodde, CEO of Brait South Africa said in a statement. “Virgin Active's successful track record, high cash generation and exciting growth prospects in both emerging and developed markets make this an attractive opportunity for Brait and its shareholders.”

CVC closed its last deal from Fund V in December 2014, acquiring a controlling stake in Sky Betting & Gaming from media powerhouse Sky in a transaction that valued the company at £800 million (€1.1 billion; $1.2 billion). The price represented a multiple of around 15x EBITDA for the 12 months ended 30 June 2014, PEI reported earlier.