Hands In Surprise Lunge For LA Fitness Chain

By Mark Kleinman, City Editor

The investor Guy Hands has lodged a surprise bid to acquire LA Fitness, the gyms chain which last year underwent a painful financial restructuring to get back into shape.

Sky News understands that Terra Firma Capital Partners, the private equity firm headed by Mr Hands, has expressed an interest in a takeover of the health and fitness group.

A source close to Terra Firma confirmed that it had informed advisers to LA Fitness's shareholders of its appetite for a deal, although it was unclear on Wednesday whether the firm had made it through to the final round of bidding.

LA Fitness, which operates 43 clubs, is expected to command a price tag of around £80m after shedding dozens of sites through a restructuring called a company voluntary arrangement (CVA) last year, 

The other bidders are understood to be Pure Gym, which last year saw a merger with discount rival The Gym Group blocked by competition regulators, and Fitness First, which was also forced to resort to a CVA amid growing financial pressure on the industry.

Lawyers say that Fitness First could face significant competition issues with a takeover of LA Fitness.

Nevertheless, Terra Firma is likely to rank as an outsider in the auction, even as it pursues a separate deal to acquire Malmaison Group, the owner of Hotel du Vin and its eponymous chain.

Either acquisition would mark a rare investment in a UK company since Mr Hands surrendered control of EMI, the music group, after it ran into financial trouble in 2010.

Mr Hands, who has been one of the UK's most prominent private equity investors during the last two decades, launched a lengthy legal battle over the fate of EMI, with the latest phase scheduled to reach court later this year.

Terra Firma's portfolio now includes Four Seasons, a healthcare group, Odeon Cinemas and Wyevale Garden Centres, with at least two of those businesses likely to be sold in the next 18 months.

Mike Ashley, the owner of Newcastle United, is also said to be a bidder for LA Fitness through Sports Direct, the retailing giant he created.

A decision about a buyer for the gyms chain is expected in the coming weeks.

In an email to staff quoted by The Daily Telegraph last year, Martin Long, LA Fitness's chief executive, wrote: "Our shareholders today are the former lenders to the business, who have significantly reduced the amount we owe them.

"They have been extremely supportive of the business as we went through the CVA process but are not natural owners of the business for the long–term. Whilst we have the funds to invest in the clubs over the next few years, we want to invest more and to invest more rapidly.

"To be able to accelerate our plans will require further new investment, and we feel that now is the right time to look for new long–term investors that can fund this next step and support our growth aspirations."

Terra Firma declined to comment on Wednesday.

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