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Duke Street wins over Esporta

Duke Street won its hostile bid for UK leisure chain Esporta. The board of Esporta recommended Duke Street’s revised 87.5 pence per share offer, which represents a nine per cent increase over the original 80 pence per share offer. However, in a statement the Esporta board expressed concern that the offer still undervalues Esporta, which has seen a significant improvement under new management. The board originally set out to reject the offer and was rumoured to be considering seeking a white knight.

In an ongoing battle, Esporta had advised shareholders to reject Duke Street’s original 80 pence per share offer, which valued the company at GBP133 million. On July 12, Duke Street upped its 24.8 per cent stake in Esporta when it acquired the 9.96 per cent stake owned by Crown Sports for 87.5 pence per share. In accordance with Rule 9 of The City Code on Takeovers and Mergers, the firm was forced to make a mandatory offer at the higher price, valuing Esporta at GBP145.5 million. The mandatory cash offer has now been declared wholly unconditional.

Esporta follows in the footsteps of privately-owned health club Cannons, which was taken private last year in a transaction led by Royal Bank Private Equity. Esporta rival Holmes Place is also exploring a possible MBO and is looking for potential private equity backers. Bridgepoint Capital is rumoured to be in the running for the business, with an indicative offer of 175 pence per share.

Alex Cooper-Evans of Duke Street, said: “I think that both Esporta and Holmes Place saw themselves de-rated by the markets. They are businesses that stumbled ever so slightly in their growth plans and for that reason were punished by the markets. In this context, these businesses are delisting not so much because of the health and fitness sector at the moment, but rather because of the quality of life that a mid-cap listed company can enjoy.” Looking towards the future, he added: “We want to give the company easier and quicker access to capital than it has as a public company to allow it to grow organically.”

Duke Street indicated that it would support a development plan going forward more effective than the one Esporta currently has in place. Duke Street would accelerate the company’s expansion programme and reverse any cost cutting which might be having a detrimental effect on existing members stressing that you have to retain the loyalty of the membership base.