Brait, a private equity firm based in Johannesburg, will take an 80 per cent controlling stake in the group, which has 1.3m members and 267 clubs.
The group was on course for a listing on the Johannesburg stock market and had appointed a roster of advisers to prepare the deal.
Goldman Sachs, Bank of America Merrill Lynch, Morgan Stanley, Standard Bank, UBS and STJ Advisors were all understood to be working on the shelved listing.
It is the second time a late stage bid has derailed a flotation of Virgin Active, after CVC Capital took a 51 per cent controlling stake in the company in 2011 for £900m just as the firm prepared to list on the market.
CVC will sell its entire holding in the deal, while co-owner Virgin Group, owned by Sir Richard Branson, will cut its stake from 46 per cent to 20 per cent.
“Virgin Active is a business that we are proud to have been associated with from the very beginning, over fifteen years’ ago,” Branson said yesterday.
“While (the) transaction is testament to the huge amount the business has already achieved, we believe that its future is more exciting.”
Brait, led by chief executive John Gnodde, has paid around £680m for its 80 per cent stake. It values Virgin Active at £1.3bn, split between £870m in equity and £430m of debt.
The takeover mirrors a similar gazumping earlier this year when private equity group KKR swooped on thetrainline just weeks before it was due to list on the London stock exchange.
BCA Marketplace, which was owned by private equity firm Clayton, Dubilier & Rice, was also due to be listed earlier this year before it was snapped up late on in a reverse takeover by Haversham Holdings.
BEHIND THE DEAL: MARK ZERDIN | SLAUGHTER AND MAY
1 Zerdin has been a partner at the Magic Circle firm since 2007, having joined the company in 2003. He focuses on takeovers, private equity investment, and public equity offering amongst other areas.
2 He has worked on several high profile deals, including the sale of Liverpool Football Club to New England Sports Ventures and the sale of minority shares in AS Roma to Starwood Capital Group
3 He attended Brasenose College, Oxford before working as a solicitor at Herbert Smith and an associate at Simpson Thacher & Bartlett. He also spent three years in venture capital.