Esporta shuns 'low' £130m Duke Street bid

The beleaguered health club operator Esporta yesterday shunned a potential 80p-per-share takeover offer from Duke Street Capital, the private equity group, as too low.

Esporta, which saw its share price collapse after a profits warning last autumn, said an offer at this level would "materially undervalue" the company. Duke Street, which has built up a 24 per cent stake in the health and fitness operator in recent months, said it, or a company associated with it, was considering making an offer at or around 80p per share. This would value Esporta at around £130m.

The private equity group, which has a history of successful investments in the leisure sector, revealed its intention after a recent spike in Esporta's share price. The shares, which traded at 119.5p last year, fell 1p to 78.5p.

Esporta, which is under new management after the incumbent Graham Coles was ousted last October, pointed to the group's improving trading prospects to justify its refusal to recommend a bid at this level. Since Maurice Kelly, who was formerly at Granada, took over as chief executive he has cut costs by more than £4m.

Analysts said Duke Street's offer, which is a 10p premium to Esporta's net asset value, was fair. "The bid is one to consider. The group has a very mixed estate, there is a lack of bidders ... and growth looks tricky from here," James Hollins, at WestLB Panmure, said.

Analysts expect trading at the premium end of the health club market, which includes Holmes Place and Whitbread's David Lloyd Leisure, to remain very competitive. While Esporta achieved a 24 per cent rise in sales in the first quarter, it was forced to slash joining fees, which analysts said would increase the rate at which customers switched clubs.

Esporta, which last month said it had terminated takeover talks because it had not received any "acceptable offers", said it remained willing to talk to Duke Street or any other interested bidder "that put forward a firm proposal that properly recognises the value of the company".