Richard Branson to sell stake in Virgin gym chain

SIR Richard Branson and private equity partner CVC have agreed to sell a majority stake in fitness chain Virgin Active to a South African investment firm for £682 million.

Branson is to off-load Virgin gym chain. Picture: Getty

The deal with Brait values the business at some £1.3 billion and will see Branson retain a 20 per cent holding – excluding a separate stake owned by the gym company’s management.

Virgin Group, which did hold a 46 per cent slice, will receive about £230m. CVC will sell all of its shareholding when the deal is completed in the summer.

Virgin Active describes itself as the leading international health club operator, with more than 1.3 million adult members and 267 clubs in nine countries. It said it was the number one health club operator by revenue in the UK and Italy.

The business opened its first club in Preston in 1999 and has undergone a series of changes in ownership while acquiring operations overseas. There are now 101 clubs in the UK and 114 in South Africa, which accounts for 55 per cent of its membership.

Virgin Active said it had a “consistently strong record of delivering profitable growth”. Revenues for 2013 were £653.1m and underlying earnings were £125.4m. The business has 14,000 permanent employees.

However, it faces stiff competition in the UK from rivals including Pure Gym, which recently claimed to have become the largest gym operator by membership with in excess of 500,000 users, just six years after it first opened its doors.

The firm, which operates 91 24-hour gyms across the UK, opened 24 sites last year. Its members pay monthly fees with no contract commitments.

Unveiling the deal, Branson said: “Virgin Active is a business we are proud to have been associated with from the very beginning. While today’s transaction is testament to the huge amount the business has already achieved, we believe that its future is more exciting. We are delighted that we will continue to play a part in this alongside Brait.”

Brait chief executive John Gnodde said: “Virgin Active is a business we have tracked for many years, and we welcome the opportunity to invest in the company, alongside one of the world’s most renowned entrepreneurs.

“Virgin Active’s long-tenured and experienced management team, most of whom have been part of the company since its founding, have delivered impressive performance throughout its history.”

Virgin Active chief executive Paul Woolf added: “Virgin Active has grown to become the leading international health club operator, with strong positions in South Africa and Europe, as well as an exciting foundation for future growth in Asia Pacific.”

Brait is to fund the deal with cash on hand.

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