The Gym Group (TGG), the fast growing, nationwide operator of 98 low cost gyms branded The Gym, has acquired 18 gyms from Lifestyle Fitness for £20.5m The deal is expected to complete on 29 September 2017.
TGG has grown rapidly since the opening of its first site in Hounslow in 2008 and has become the second largest player in the low cost gym market. It expects to open 20 new sites under its organic rollout programme in 2017, having opened 15 new sites in 2016 and 19 new sites in 2015.
The group, as part of its stated strategy, has also sought to identify bolt-on acquisitions as a way of accelerating its rollout.
All 18 sites, which are high quality, well invested locations mainly in the Midlands and North of England will transfer as going concerns including the existing membership. Staff dedicated to the sites will also transfer to TGG along with 5 other central staff.
Ten of the sites will be converted to The Gym brand immediately following assignment of the leases. The Group expects these sites will have been converted by the end of Q1 2018. These 10 sites are anticipated to have the potential to perform strongly with maturity expected to be shorter than the firm's normal two-year profile due to the existing membership base. Each conversion is expected to cost £450k.
A further 8 sites will continue to operate under the Lifestyle Fitness brand and will be considered for conversion to The Gym brand in due course. Each of these gyms will be provided with some initial capital investment, primarily in gym equipment, expected to total £110k per site.
The 18 sites being acquired earned site EBITDA (excluding central costs) of £3.45m in the 12 months to 31 December 2016 with revenues of £11.1m and a net book value of £19.2m.
John Treharne, CEO of The Gym Group, commented, 'Lifestyle is an excellent and complementary fit with our existing estate. These are well invested gyms in strong locations with an established membership.
'The acquisition strengthens The Gym Group's position in the Midlands and North in areas where we are currently underrepresented and accelerates our expansion plan. The addition of these gyms is anticipated to be significantly earnings enhancing by 2019.'