Branson 'in gym merger talks'

Richard Branson was today said to be planning to merge gym chain Holmes Place with his own health club, Virgin Active.

Richard Branson was today said to be planning to merge gym chain Holmes Place with his own health club, Virgin Active.

The tycoon is in advanced talks over the takeover which would turn Virgin Active into the second biggest health and fitness chain in the UK behind Fitness First, according to The Sunday Times.

The report said the enlarged Virgin Active group would then be lined up for a flotation, which could value it at as much as £1bn (€1.4bn).

It is thought that the deal could be completed within weeks in a move that would mark the end of the Holmes Place brand in the UK.

The Sunday Times said that under the terms of the proposed deal, private equity firms Bridgepoint Capital and Permira would exchange their controlling stake in Holmes Place for between 12% and 15% of the enlarged Virgin Active.

Bridgepoint and Permira bought Holmes Place in 2003 for £210m (€303.2m) and it is thought they would continue to own its operations in Switzerland, Germany and Austria.

Holmes Place currently operates 48 clubs in the UK and has 200,000 members while Virgin Active operates 111 gyms including some in Europe. It has 800,000 members and made pre-tax profits of £33m (€47.6m) last year.

A takeover of Holmes Place by Virgin Active is expected to value the enlarged firm at £700m (€1bn) and a stockmarket listing could take place within 18 months giving Branson another sizeable payday.

He recently banked a multi-million-pound windfall from the sale of Virgin Mobile to cable operator NTL.

Holmes Place has struggled recently in the highly competitive health club market and has also disposed of its assets in Portugal and Spain.

A takeover by Virgin Active would be the latest in a string of deals in the sector, which have seen private equity and property firms invest in the industry.

Last September, BC Partners paid £835m (€194.9m) for Fitness First and more recently property firm London & Regional bought Next Generation. There has also been ongoing speculation surrounding David Lloyd Leisure, which is owned by Whitbread.

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