Cinven poised to win race to take over Fitness First clubs

Cinven, the private equity house, has emerged as the front-runner in the race to buy Fitness First, the health club operator that hoisted a "for sale" sign last month, in a deal worth up to £370m.

Talks between the two parties have been under way since October, when the budget gym operator joined its upmarket rivals such as Holmes Place by issuing a profit warning that caused its shares to more than halve. Its stock has collapsed from a year high of nearly 500p to 140p.

Cinven is understood to be mulling an offer worth up to £230m and would also take on the group's debt, valuing Fitness First at about £370m. It is likely to back Mike Balfour, the company's founder and chief executive, in a buyout of the business.

No deal is likely to be signed until well into the new year because Cinven, like the other shortlisted bidders, will be anxious to learn how the peak January membership period has fared. Fitness First is due to report its preliminary results for the year to October at the end of January, when it will provide an update on current trading. Apax Partner and Electra Partners are thought to also be on the Fitness First shortlist.

Private equity interest in the fitness industry has accelerated over the past 18 months after the souring of City sentiment with the sector. Duke Street Capital acquired Esporta in the summer and Bridgepoint Capital is poised to lead a management buyout at Holmes Place after an earlier deal to merge with Cannons collapsed. Cinven had previously been linked with a bid for Holmes Place.

Mr Balfour, a former accountant, started Fitness First 10 years ago on the site of a squash club. Although he is still feted in some City quarters, his credibility took a knock when it emerged that an over-exuberant openings programme was to blame for October's profits warning. Fitness First, which has 311 clubs across the world from Hong Kong to France, expects to open just 50 new outlets next year, down from 80 last year.