CVC in £1.3bn Virgin Active exit to Brait

Mikkel Stern-Peltz
17 April 2015

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CVC Capital Partners has sold its 51% stake in fitness chain Virgin Active to South African listed private equity firm Brait for ТЃ1.3bn (around 10.5x EBITDA).

Brait stated the equity value of the deal as £870m, and reports suggest CVC more than doubled its original investment.

The exit also saw Virgin Group sell down part of its stake from 49% to 20%, excluding management. Brait will hold an 80% stake in Virgin Active following the transaction, including the shares held by existing management.

CVC's exit comes nearly four years after it acquired its 51% stake in Virgin Active from the Virgin Group, in a deal with an estimated enterprise value in the region of £900m.

The deal was a balance sheet transaction for Brait, and was the result of a dual-track process that included plans for a £1.5bn listing on the Johannesburg Stock Exchange.

The transaction is subject to approval by South African and Namibian competition authorities.

Brait's acquisition continues a trend of private equity activity in the fitness and health club sector, which includes NorthEdge's buyout of Total Fitness and Terra Firma's rumoured bid for LA Fitness.

Previous funding
Virgin Group sold 51% of its fitness group to CVC in a deal with a reported value of around £900m in August 2011, through the GP's 2008-vintage CVC European Equity Partners V fund.

Company
Founded in 1997, Virgin Active operates 267 fitness and health clubs with a combined membership of 1.3 million across nine countries.

The company had revenues of £653.1m in the year to May 2014, with EBITDA of £125.4m. It employs around 12,000 people.

People
John Gnodde, CEO of Brait South Africa, worked on the deal for the GP, with partner Pev Hooper representing CVC. Paul Woolf is the CEO of Virgin Active.

Advisers
Equity – Linklaters, Alex Woodward, Stuart Boyd, Stuart Bedford, Tim Lowe (Legal); Cliffe Dekker Hofmeyr (Legal).
Vendor – Slaughter and May (Legal).
Management – Allen & Overy (Legal); Gibson Dunn (Legal).