Cannons drops Holmes Place bid

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Holmes Place heaped fresh gloom on the health and fitness sector yesterday after it revealed that a downturn in trading had prompted its privately owned rival Cannons to bow out of a £205m takeover bid.

The double blow forced Holmes Place, which operates healthclubs at the premium end of the market, to warn that profits "may be significantly below expectations". Its shares plunged 40 per cent to 102p, valuing it at just over £100m.

Holmes Place blamed the downturn in trading on a slump in membership numbers, particularly at its gyms in the City of London where economic woes have forced investment banks to slash tens of thousands of jobs. It also said trading had been disappointing in Germany and Austria.

The group, which has five clubs in the City out of a UK total of 49, said retention rates in those clubs were "lower" than the industry average of 60 per cent and that fewer people were joining.

While Cannons said it intended to make a new offer below its old 200p-a-share level, Holmes Place, which is led by chief executive Allan Fisher, said it would be "unlikely" to recommend it. Holmes Place left the door open for a bid from a third party, after it revealed that it had "commenced discussions" with an unnamed party. City sources pointed to Cinven, the venture capitalist.