Virgin muscles in on Esporta with £77.6m deal as membership grows

HEALTH club chain Virgin Active flexed its muscles with a £77.6 million deal to buy 55 Esporta gyms yesterday, as its profits and membership continues to grow.

Virgin has 71 fitness clubs in the UK. The latest deal will take its Scottish portfolio to five centres, as it will gain Esporta's two clubs in Glasgow if the sale is approved by the Office of Fair Trading (OFT).

The move came as the Milton Keynes-based company reported that it was in good shape after underlying profits increased 13 per cent to 114.6m in 2010, helped by the opening of additional clubs overseas.

Virgin, which is majority-owned by Sir Richard Branson, described trading in 2011 as strong after it powered through the one million membership barrier for the first time.

Although it opened no clubs in Britain, its earnings increased for the third year in a row, it added.

Chief executive Matthew Bucknall said: "The location of Esporta's clubs is an excellent fit with our estate and significantly strengthens our business.

"We have been able to sustain this growth over the last three years when economic conditions have been difficult and we continue to see excellent prospects for future growth in all our territories."

Virgin will be buying the gym businesses only, with Esporta's owner Societe Generale holding on to the firm's valuable property portfolio.

The French bank rescued Esporta from a lengthy administration in June 2009 after the company got into difficulties due to falling membership.

New management appointed by the bank reversed the decline, and the chain now has some 159,000 members.

Esporta chairman, Richard Segal, said yesterday: "Societe Generale's policy of acquiring the business from the administrator has paid off."

He added that Virgin Active was a "more logical owner" of Esporta's operational business and said the deal would be good for members and employees.

The bank also hopes to eventually sell the company's 17 freeholds and long-term leaseholds. Yesterday's deal will make them considerably more attractive, as Virgin will sign 25-year leases on the properties, paying a total of 13m a year in rent.

If the deal is approved, it is expected that the Esporta gyms will be re-branded under the Virgin banner within two years.

Virgin, which currently has 194 clubs worldwide, said its enlarged UK business will have around 430,000 members and revenues of more than 325m. Virgin previously bought ten clubs from Esporta in the UK in 2004 and 2005 and six in Spain.

Yesterday's deal marks the firm's first major acquisition since it bought Holmes Place almost five years ago.