British health chain limbers up for sale

Esporta, the British health and fitness club chain, is being circled by private equity firms and property investors.

Majority owner and private equity company Duke Street Capital has already considered an approach reportedly worth up to £500 million ($955 million; €743 million) from London & Regional Properties, the privately-owned investment group headed by Richard and Ian Livingstone.

The fitness chain, which was created in 2002 when Duke Street took Esporta private and then bolted on Invicta Leisure to create a larger company, has also been approached by Blackstone and global private equity firm Apax Partners.

In response, it has appointed Citigroup to conduct an auction.

Whitbread, the FTSE 250 leisure giant and owner of David Lloyd Leisure, is expected to be among the bidders.

The property portfolio of Esporta is estimated to be worth around £300 million while the operating business is put at around £160 million.

Part of Citigroup’s remit is to consider splitting the company into a prop co/op co structure.

There have been reports that London & Regional is interested in a ‘swap’ deal involving the Esporta property in return for Next Generation gyms which London & Regional bought in May for £200 million.

However, it is understood that no such discussions have taken place.

London & Regional, which owns the Hilton Park Lane in London and the former London headquarters of high street giant Marks & Spencer’s, has been an active investor in property in the UK and Europe. It has been particularly active in Scandinavia.

Esporta is not the only British health and fitness chain set to change hands this year. Cannons is another. The company’s majority shareholder, the private equity arm of Royal Bank of Scotland, is preparing to talk to prospective advisers over its options, according to weekend reports.