Duke Street snaps up 18% of Esporta

Duke Street Capital, the private equity company, yesterday mounted a second dawn raid on shares in Esporta, the troubled health and fitness operator, in what City sources interpreted as a precursor to a full bid.

A share-buying spree by Teather & Greenwood, the stockbroker, on behalf of Duke Street was understood to have increased the private equity company's stake from 14.95 per cent to just over 18 per cent. Heavy trading in Esporta shares led by Duke Street, which City sources said purchased 5.4 million shares at 70p each, helped push the stock 2 per cent higher.

Esporta, which has issued two profits warnings in the past three months and parted company with one chief executive, last week confirmed it had been in talks with a number of unnamed parties.

Duke Street is believed to have approached Stephen Lewis, the former chief executive of Pinnacle Leisure, to front its planned bid but would face stiff competition for Esporta. Electra Partners Europe, a rival private equity group, is among the parties also thought to be talking to Esporta.

David Lloyd, the former tennis star, has written to Esporta's advisor Lazard about merging the chain via a share swap with his Next Generation fitness club outfit. Mr Lloyd, who sold his David Lloyd Leisure chain to Whitbread in 1995, said: "The synergies between the two companies would be a very good opportunity for Esporta's shareholders to get cash out down the line at a better value than selling out now." Mr Lloyd, however, said he would not get involved in a bidding war.

Analysts said any bid would need to be somewhere north of 75p a share. The shares rose 1.5p to 71p, valuing the company at £118m.

Maurice Kelly, the former Granada and easyEverything executive who last week replaced Graham Coles as chief executive, will review the business before deciding what action to take.