Esporta keen to muscle in on gym club consolidation

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The Independent Online

Esporta, the once-listed health and fitness club chain now owned by Duke Street Capital, plans to buy up rival operators before coming back to the stock market.

Esporta, the once-listed health and fitness club chain now owned by Duke Street Capital, plans to buy up rival operators before coming back to the stock market.

The chief executive Neil Gillis, speaking as Esporta announced strong results for 2004, predicted a bout of consolidation in the health and fitness sector, saying every operator was in effect "up for sale".

Groups such as Holmes Place, Cannons, Fitness First and Esporta have all been taken over by private equity groups in recent years, leaving LA Fitness as the only quoted health club company. It too is now in talks to find a buyer.

Mr Gillis said consolidation was the only option for private-equity owners to exit their investments as most chains are too small to float as stand-alone companies. "Everyone is up for sale and everyone is talking to each other about whether they can do some kind of deal," he said.

"Most of the companies, including Esporta, are too small on their own to come back to the stock market. Although the cost savings of putting two health club groups together are not very large, the venture capital backers who bought up most of the industry want an exit, so they will drive consolidation."

Mr Gillis said Duke Street Capital, the owner of Esporta, was likely to be a consolidator of rival businesses, rather than be subject to a takeover itself. "It will be a year or so yet before anything comes back to float. There needs to be consolidation and management teams have to prove that they can make returns on capital before it happens," he said.

Esporta was sold to Duke Street Capital in 2002 after the market became overcrowded and business declined. Since then, a new management team led by Mr Gillis, formerly of the brewing and pubs group Greene King, has invested in building upmarket racquet centres to rival Whitbread's David Lloyd Leisure brand.

During 2004, sales grew by more than 7 per cent to £168m and earnings were up 6 per cent to £37m.

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