Property groups eye David Lloyd

Property groups look to be the most likely contenders to buy the David Lloyd health clubs chain from current owner Whitbread for as much as £1bn (€1.47bn).

London & Regional Properties could be a frontrunner. The real estate specialist bought Next Generation Clubs last May for £197.5m (€290.73m). This is the chain run by David Lloyd’s son Scott, who remains as managing director.

Ian Livingstone, joint managing director of London & Regional, told IFR Buyouts Europe: “Yes, we are interested but it is early days and I cannot say any more.” He added that Next Generation would be an obvious buyer.

UBS is believed to have been appointed by London & Regional to investigate making a possible offer.

Another party that might be keen is the Halabi family. The owners of former Rothschild country house Mentmore Towers in Buckinghamshire as well as the Aviva building in the City of London bought Esporta last November from Duke Street Capital. No price was disclosed but it is thought the chain fetched up to £460m (US$874m).

It is believed that the Halabis are keen on the company but don’t want to overpay for the business. A source said: “The family would want to determine the true value of the group before making a full bid.”

Both David Lloyd and Esporta run larger health clubs, which tend to offer facilities such as tennis courts. These are more attractive to property investors as they tend to have more valuable freehold assets.

Smaller operators, such as Fitness First, lack this strong property backing. This might discount LA Fitness and Virgin Active as credible bidders. Last September, Virgin Active bought Holmes Place. The latter’s private equity investors, Bridgepoint and Permira, retained stakes in the combined group, valued at £650m. LA Fitness is backed by private equity firm Mid Ocean.

Separately, Rothschild has been appointed by Lyceum Capital to conduct a sale of Asquith Nurseries. The company owns 115 childcare facilities and manages several such centres for David Lloyd Leisure. A report suggests the group could fetch as much as £100m (US$196m).

Lyceum first invested in the business in May 2001 and has made five acquisitions since then, doubling its size. Last year, the group made revenues of £40m. Lyceum also backed related business Asquith Schools. Under the private equity group’s ownership it expanded from nine to 19 prep schools before being sold to Englefield Capital in 2004.

Chris Spink