Viva Leisure to acquire Plus Fitness franchisor for $18m

Viva Leisure to acquire Plus Fitness franchisor for $18m

Viva Leisure expects a new deal will make it the fourth-largest fitness group in Australia by number of clubs, and the third-largest in member numbers. 

Earlier this week industry body Fitness Australia reported 60 per cent of gym businesses claimed they would go out of business without JobKeeper, but an acquisition announcement today shows optimism may have returned to the sector.

With JobKeeper extended by a further six months, Viva Leisure (ASX: VVA) sees fit to continue its aggressive expansion trail it has blazed since listing on the stock exchange in mid-2019.

The Canberra-headquartered company has reached a deal to acquire Australian Fitness Management (AFM), the master franchisor of Plus Fitness, for $18 million plus a $2 million earnout.

AFM has 190 franchised clubs across Australia, as well as three in New Zealand and four in India. These clubs have 175,000 members combined and revenues above $100 million.

The agreement follows Viva Leisure's growth from 33 to 83 locations since listing, through  expansion of its brands including Club Lime, Groundup, Gymmy Pt, Hiit Republic, Cycle Life and FitnFast, the latter acquired in mid-February.

It has also only been just under two months since Viva announced it would be reopening its gyms

The deal with AFM is expected to occur by 31 August, but is still subject to conditions and a restructuring of AFM's existing lease and sublease arrangements.

Viva Leisure will retain the services of the AFM founders, John Fuller and Nigel Miller, under employment contracts with a minimum term of 12 months, reducing integration risk, and assisting the continued expansion of the Plus brand.

Post the acquisition, the composition of Viva Leisure's members by geographic location will reflect the continuing diversification and reduced reliance on the ACT membership since it listed the business in June 2019.

Approximately 25 employees will join the Viva Leisure team, bringing the combined group to over 1,000 employees.

The combined group of Viva Leisure's existing clubs and the acquired AFM business will extend to approximately 280 owned and franchised clubs comprising over 270,000 members, making it the 4th largest group in Australia by number of clubs and 3rd largest group by member numbers.

The Acquisition represents a historic FY2020 normalised maintainable pro forma EBITDA multiple of 8.0x or an NPAT multiple of 12x.

"The acquisition of the Plus Fitness brand, systems and Master Franchisor, including the Master Franchise licence for New Zealand, and a first right of refusal on the existing 197 locations makes this the most exciting and largest opportunity in our history," says Viva Leisure's CEO and managing director Harry Konstantinou.

"It expands on and continues to cement Viva Leisure's position as a leading and fast-growing health club owner and operator in the Australian market."

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