'Dragons' Den' Bannatyne buys LivingWell gyms

Duncan Bannatyne, one of the Dragons in the BBC's Dragons' Den entrepreneurial show, pulled off the £90m acquisition of the LivingWell health club chain from Hilton Hotels Corporation yesterday.

The entrepreneur beat off tough competition from LA Fitness, which is backed by venture capitalists MidOcean Partners.

Mr Bannatyne, who toured three of the 24 acquired LivingWell clubs after signing the deal at 5am, said: "At the beginning Hilton thought we did not have the money to buy them. LA Fitness, which have good backing from venture capitalists, were touted as the most probable buyer but we outbid them." The sale includes 24 stand-alone clubs around the UK but not the health clubs located in Hilton hotels, which will now be managed locally.

The deal brings the number of clubs in the Bannatyne Fitness chain to 61, making it the fifth-largest gym chain in the country, ahead of Cannons. The new clubs will be rebranded as Bannatyne Fitness and revamped. Mr Bannatyne has earmarked £500,000 to put in a new computer system and better turnstiles, redo the café and bar areas and add drinks licences where necessary.

After the deal, Bannatyne Fitness will have a combined membership of 180,000. The chain was born 10 years ago, with the first club opening on Teesside when Mr Bannatyne needed regular exercise to recover from a skiing accident and could not find facilities locally. He decided to use the proceeds from the sale of his previous business, Quality Care Homes, to set up the fitness chain. He also runs hotel, casino and bar businesses and was valued as being worth £168m in the Sunday Times Rich List.

The fitness sector has seen a flurry of deals in the past year, led by private-equity and property investors. Fitness First, Britain's biggest health club chain, changed hands nearly a year ago when BC Partners paid £835m to the chain's previous venture capitalist owner Cinven. Earlier this year London & Regional, the property firm backed by the Livingstone brothers, acquired Next Generation, the racquets club business run by the former tennis pro David Lloyd.

One of the losers of the auction for Next Generation was Esporta, which is owned by Duke Street Capital and is on the prowl for a new target, likely to be David Lloyd Leisure.