Viva Leisure raising $16m to fund acquisitions and take Club Lime into WA

Health and fitness club group Viva Leisure (ASX: VVA) is raising $16 million to fund the acquisition of eight existing centres in Western Australia, where it plans to take its Club Lime brand for the first time.

The health clubs deal comprises two transactions totalling $15.7 million and will add about 20,000 members to the Viva Leisure network.

Canberra-based Viva Leisure says the eight clubs will contribute more than $3.9 million EBITDA per annum, before accounting for synergies of about $1 million a year by FY26.

One of the acquisitions is an existing franchise operation, and in light of their rebranding as Club Lime, Viva Leisure says it has made a strategic decision to not disclose their current brand names.

Once rebranded, the acquisitions will expand the Viva Leisure’s footprint for Club Lime into its sixth state or territory.

Viva Leisure already operates in WA through Plus Fitness centres and the company plans to explore options for roaming membership between the Club Lime and Plus Fitness corporate locations.

“The addition of these two strategic acquisitions will deliver further diversification and scale, and an even stronger growth trajectory,” says Viva Leisure CEO Harry Konstantinou.

“Our journey has been one of growth, innovation and unwavering commitment to delivering exceptional value to our members and stakeholders.

“This has seen Viva Leisure grow in five short years since listing to be the second-largest health club owner in the nation and the second-largest network of health clubs in the country, with the Club Lime brand being Australia’s largest non-franchised health club brand.

“With guidance EBITDA for FY24 forecast to reach over $35 million, the financial performance of the business has been resilient, growing an impressive 400 per cent since IPO in June 2019.”

Viva Leisure says the entry into the WA market paves the way for potentially other mergers and acquisitions in the region.

“The WA market is underserviced relative to its population, presenting a significant opportunity for Viva Leisure to leverage its portfolio of brands to influence the market,” says the company.

Once the acquisitions are settled, Viva Leisure will own and operate 183 locations across several brands including Ground Up Studios and Rebalance Studios.

Viva Leisure’s capital raising comprises the placement of 11 million shares at $1.45 each, which is a 7.5 per cent discount to the closing price yesterday of $1.56. The company also plans to use existing cash and debt facilities to help finance the acquisitions and rebranding.

“The board of Viva Leisure has decided to pursue this equity raise to support these acquisitions, which are beyond our usual business operations,” Konstantinou.

“Moving forward, the company will continue to utilise its cash flow and existing debt facilities for regular business activities, including other acquisitions.”