Fitness group expands gym chain in £20m acquisition

Lifestyle Fitness

Low-cost fitness group The Gym has expanded its presence in the Midlands and North with a £20m acquisition.

The Gym Group, which operates 98 The Gym-branded outlets around the country, has purchased 18 gyms from Competition Line, which operate rival gym chain Lifestyle Fitness, in a cash deal totalling £20.5m.

The sites acquired are in: Birmingham (Hagley Road), Birmingham (Trident), Barnsley, Burnley, Chesterfield, Darlington, Leicester, Handforth (Wilmslow) Cheshire, Hartlepool, Tamworth, Manchester (Deansgate), Kilmarnock, Preston, Stoke, South Shields, Wakefield, Whitefield and Wembley.

The deal is expected to complete by the end of the month.

The Gym Group, which has grown rapidly since the opening of its first site in Hounslow in 2008, has become the second largest player in the low-cost gym market. It expects to open 20 new sites under its organic rollout programme in 2017, having opened 15 new sites in 2016 and 19 new sites in 2015.

It has been named as the operator of a new gym at St. Modwen’s Longbridge town centre development.

The newly-acquired sites will transfer as going concerns including the existing membership. Staff at the outlets will also transfer to TGG along with five other central staff.

Ten of the sites will be converted to The Gym brand immediately following assignment of the leases, with the process being completed by the end of Q1 2018.

These ten sites have been identified because of their potential to be the strongest performers, with maturity expected to be shorter than the group’s normal two-year profile due to the existing membership base. Each conversion is expected to cost £450,000.

The remaining eight sites will continue to operate under the Lifestyle Fitness brand and will be considered for conversion to The Gym brand in due course. Each of these gyms will be provided with some initial capital investment, primarily in gym equipment, expected to total £110,000 per site.

The 18 gyms being acquired earned site EBITDA (excluding central costs) of £3.45m in the 12 months to December 31, 2016, with revenues of £11.1m and a net book value of £19.2m.

TGG said the acquisition was being funded from its existing financing facilities. In addition, the group has extended its existing capital expenditure facility by a further £10m.

The acquisition is expected to be significantly earnings enhancing by 2019 as a result of the expected growth in membership of the acquired sites.

John Treharne, CEO of The Gym Group, said: “Lifestyle is an excellent and complementary fit with our existing estate. These are well invested gyms in strong locations with an established membership.

“The acquisition strengthens The Gym Group’s position in the Midlands and North in areas where we are currently underrepresented and accelerates our expansion plan. The addition of these gyms is anticipated to be significantly earnings enhancing by 2019.”

Click here to sign up to receive our new South West business news...