Cinven team runs off with Fitness First

Fitness First added to the trend for health clubs leaving the stockmarket yesterday after the budget operator agreed to a £204m management buyout backed by Cinven, the private-equity group.

The management team, led by Mike Balfour, the group's co-founder and chief executive, will net about £34m from the deal although they will reinvest £18m of that for an 18 per cent stake in the business.

He said the 175p-a-share cash offer – lower than the market had been expecting – was "very fair and reasonable" given the recent deterioration in the market place and a rash of profit warnings from competitors such as Holmes Place and LA Fitness. Fitness First issued a profit warning in October, since when it said trading had got worse.

Mr Balfour said: "It's a much safer option to be in the private market for the time being. It will provide access to capital that we were unable to get from the stockmarket or banking networks in these difficult times."

He receives £10m but will reinvest £5m of that for his shareholding of 5.4 per cent, while Christopher Pearce, the chairman, will receive about £6m after reinvesting the same amount.

The deal, which is backed by the company's independent directors, has already received acceptances from 40 per cent of shareholders. One institutional investor said: "The price is fairly keen but you have to have some reality that things are difficult for the sector."

Dominic Murphy, a director at Cinven, said the buyout vehicle had put in place debt facilities of £332m. Cinven will receive a £2m break-fee if another bidder emerges, which analysts said was still a possibility.