UK-based private equity firm Bridgepoint made a three-times return on its ninth major realisation of the year, drawing speculation of further activity in a sector where private equity is already strong.
Bridgepoint has sold a 55% stake in Virgin Active to Virgin for £134.5m. The deal is the second in the sector in the last couple of weeks. Late last month, buyout firm Cinven sold Fitness First to rival BC Partners for £835m, while talk persists that Whitbread may be split up, resulting in the sale of David Lloyd, its health clubs arm.
The ousting of Stewart Miller as managing director of David Lloyd focused fresh attention on the future of the group and it is thought likely that Virgin could now come into play as a potential suitor.
David Lloyd has under-performed a sector that has struggled to retain its customers, prompting analysts to claim that performance can be improved. At a mooted price tag of around £600m to £700m, the company is likely to attract a long queue of well-funded buyout firms.
“I think Whitbread will break itself up as a defence against an outright buyer in the first half of next year,” said Peter Taylor, chief executive at Duke Street. “It has a brand new chairman from Bunzl, and an old fashioned CEO in Alan Parker, who has already made a fortune by selling Marriott. It also has a new FD, Chris Rogers, who joined from Woolworths, and has near enough booted out Deutsche for Morgan Stanley [for advisory business]. I think the historic conservatism to do with staying in the FTSE will go.”
If Whitbread did opt for a disposal, the expected valuation would place it in the sweet spot for many UK private equity firms.
Duke Street, which bought the Esporta chain of health clubs in 2002 and quickly bolted on the Invicta franchise, has already expressed an interest. “We have looked at it, and David Lloyd represents a very good fit for Esporta,” Taylor said.
Additionally, not only is Duke Street keen on buy-and-build, but Taylor himself was formerly finance director of Cannons, another fitness club chain.
Other possible private equity buyers include US buyout giant Blackstone, which has recently turned its attention to consolidating UK leisure businesses.