24-hour gym operators shrug off potential $1 billion sale of Fitness First

Fast-growing 24-hour fitness franchise Anytime Fitness has fobbed off the prospect of a change of ownership at the market-leading gym chain Fitness First, saying gyms that never close are nabbing market share from more traditional chains.

David Ciantar, general manager for Anytime Fitness, says there were market rumours that a private equity sale of Fitness First was on the cards, but his company is focused on expanding its network, not the sale of its rival.

“You certainly hear of activity happening within the industry, but it’s more about supporting our franchisors,” Ciantar says.

Anytime Fitness had recorded a 300% increase in club numbers over the past year to 100, and plans to open 300 new clubs by 2014, Ciantar says.

“There’s been increasing demand for 24-hour gyms. We would probably be affecting them more than they would be affecting us.”

Ciantar adds that Fitness First and Anytime Fitness do not operate in the exact same space, given Anytime is run by franchisees and is open at all hours, whereas Fitness First is not.

He says a new owner of Fitness First would “certainly need to add value and take it on the next step of the corporate journey”.

According to The Australian Financial Review, Fitness First is now being offered to private equity after its UK owner BC Partners failed to a get a float in Singapore off the ground last month.

The paper says Fitness First’s Australian and Asian operations – which include 165 gyms and more than 400,000 members – could be worth up to $1 billion, with annual revenue understood to reach $500 million. Vendors are reportedly hopeful for a sale by the end of the year.

Fitness First, formed in the UK in 1993 and listed in London three years later, calls itself the world’s largest global health club and gym operator. After entering Australia in 2000, it has since nabbed about one-fifth of the highly fragmented gym market.

BC Partners backed out of a $US1.8 billion float on the Singapore exchange last month, reportedly blaming volatile market conditions.

Fitness First was contacted for confirmation this morning, but did not respond before deadline.

The report follows the majority investment by private equity firm CVC in Richard Branson’s Virgin Active health clubs, to help fund the chain’s aggressive expansion plans.

Under the deal, CVC has 51% of Virgin Active and entered the Asia-Pacific through the takeover of Virgin Active’s four Australian clubs.

This week, real estate group CBRE said 24-hour gym operators target “exercise-conscious professionals looking to work out close to home but also reduce non-essential spending.”

“These fitness clubs have smaller space requirements, typically between 300sqm and 500sqm which, coupled with limited staff costs, results in lower overheads,” CBRE senior negotiator Shane Cook said, adding franchisee demand currently outstrips the supply of suitable and available locations in New South Wales.