Fitness First mulls £630m Asia sell-off


PRIVATE equity owners of Fitness First are considering offloading their lucrative Asian and Australian arms through a flotation or a sale for more than A$1bn (£638m).

BC Partners, which last week pulled an initial public offering for the gym chain’s Singapore business, is said to have received takeover approaches already.

It has not ruled out taking public the Australasian imprint of Fitness First, however, and could do so in the first quarter of next year.

BC Partners, which declined to comment, has grown the chain globally since buying it from Cinven for an enterprise value of £835m in 2005.

Now it is believed to be working with advisor Rothschild on a possible disposal of the Australasia business, which has 165 gyms and more than 400,000 members.

CVC Capital Partners, which in August took a 51 per cent stake in Virgin Active for £450m, has ruled itself out of the running and many of Australia’s private equity firms could not manage a deal. Several larger buyout groups, including Archer Capital, CHAMP Private Equity and Pacific Equity Partners are not believed to be interested.

A buyout of Fitness First would pose several challenges for a private equity firm because of the cost of gym equipment and leasehold liabilities.

Banking sources have suggested a debt-to-equity ratio of around three times may be possible, below the usual four to five times that buyout firms prefer, and meaning a bigger cash payment would be needed.

Fitness First has a strong global presence with operations in Singapore, Hong Kong, Thailand, and Malaysia. Last year it derived just under half its revenue and about two-thirds of its operating profit from Asia and Australia combined.

Last week BC Partners pulled an IPO in Fitness First that was expected to raise around £500m. It would have valued the chain at between £1bn and £1.2bn

Analysts have warned that the performance of the gym industry is tied to that of the wider economy, with membership often cancelled during a slowdown.