Grade puts night clubs and bars up for sale

FIRST LEISURE said yesterday that it is planning to spin off its night club and bars division and reinvent itself as a pure health clubs business. The decision comes less than a week after the group called off talks about merging its health clubs with the rival leisure group Cannons after failing to agree terms.

First Leisure's chief executive, Michael Grade, yesterday denied suggestions that yesterday's plan to sell the bars and keep the clubs represented a U-turn in strategy since last week.

Mr Grade said the group had already been studying plans to spin-off the night clubs business for some time when the opportunity to explore a merger with Cannons came along.

He also held out the prospect of returning some cash to shareholders if the nightclubs were sold for a reasonable price.

However, he insisted that a sale was just one option. Merging the business with another operator was also a possibility, he said.

Analysts said that the businesses being sold could raise pounds 200m.

Mr Grade, who headed up Channel Four television before he took over as chief executive of First Leisure two years ago, said: "This is part of a long process that has been going on since I took over ... We have sold the bingo and the resorts. While all the three businesses we have are very good businesses, they have very little in common."

He added: "There comes a point in any business where you have to pull it up by the roots and re-examine it so you don't do the same again and again. That way lies stagnation."

To reinforce the argument for getting out of night clubs, the group yesterday put out a trading statement for the six months ending on 30 April showing revenues down 6 per cent in both the night clubs and family entertainment divisions. However, health clubs have been booming, with like for like sales up 14 per cent in the first half.

Mr Grade said he felt that the move would lead to more transparency and more focus. "We made some good calls in health and futures, aiming for the top end of the market - the large and family oriented clubs which are coming on-stream."