Management changes at Fitness First's UK base

Private equity group BC Partners has replaced the senior management team at its Fitness First health club chain as it fights to preserve its US$660 million equity investment in the highly indebted company.

London-based newspaper The Financial Times reports that the move by BC Partners comes as analysts forecast further consolidation in the UK fitness market, citing a slowdown in consumer spending and the emergence of low-cost competitors.

BC Partners recently replaced Stefano Quadrio Curzio as Chairman of Fitness First, bringing in Managing Partner Andrew Newington. This move was followed by the arrival of Chris Stone, known for turning round private equity-owned Northgate Information Solutions, replacing Colin Waggett as Chief Executive.

The UK buy-out group has also replaced Fitness First's Chief Financial Officer and Head of UK operations.

The UK buy-out group will next month enter negotiations with Fitness First's creditors over the refinancing of a US$860 million debt burden and follows an aborted attempt last year to list the company on the Singapore stock exchange and use the US$460 million in expected proceeds to pay down debt, a move that was derailed by global financial market volatility.

Stone is set to curb Fitness First's spending after relentless growth in the past few years, which led to spiralling costs, particularly in the group's middle management.

The Financial Times reports that the new Chief Executive is expected to reduce the number of managers while reinvesting in the chain's more than 430 clubs in 15 countries.

Fitness First, which is the third-biggest fitness chain in the UK market by membership, has a major presence in Australia and a growing portfolio of clubs in Asia. It reversed its European expansion strategy in 2010 when it sold all of its clubs in the Benelux countries, Spain and Italy.

BC Partners bought the gym chain in 2005 for £835 million and spread the investment across two of its private equity funds.

Analysts quoted by The Financial Times suggest that the chain is now fighting in a low-growth market where start-ups are attacking the incumbents by offering access to their facilities without a monthly contract.

Analysts at Mintel, the UK consumer research group, recently predicted subdued growth rates in the £2.7 billion UK fitness market. In a report last year, Mintel forecast further consolidation in a sector where the top seven operators account for 23% of the number of clubs.

Last year, Richard Branson's Virgin Active bought 55 premium Esporta sites.

The £78 million deal came only months before private equity group CVC Capital Partners took a 51% stake in Virgin Active to support its Asian growth strategy, which analysts said mimicked Fitness First's expansion in the region a few years earlier. 

14th September 2011 - MEMBERSHIP, PROFITS FALL AT FITNESS FIRST

16th April 2011 - PETE MANUEL TO HEAD FITNESS FIRST AUSTRALIA 

4th November 2010 - FITNESS INDUSTRY PUTS CUSTOMER SAFETY FIRST 

5th January 2010 - FITNESS TO BENEFIT AS AUSTRALIA TURNS TO SELF-IMPROVEMENT 

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