Guy Hands weighs bid for LA Fitness chain

Guy Hands is throwing his hat into the ring in the bidding for LA Fitness, pitting his private equity firm against Pure Gym and Fitness First in the contest for the struggling gym operator.

The Terra Firma owner is weighing a bid for the chain of 43 gyms, which went into administration last year through a company voluntary arrangement process, according to a person familiar with the matter.

LA Fitness has been hit by the rise of discount gyms at the lower end of the market and specialised health operators at the top end. Last year, it sold 33 gyms to Mike Ashley'sSports Direct and the remainder of its estate is in London and the southeast.

Fitness First, which is shifting into the premium health and fitness market, is planning to submit its final bid this week, according to a person familiar with the process.

The company's bid could include "ringfencing" parts of the LA Fitness estate that overlap with its existing stock of 77 UK gyms to avoid falling foul of a competition authority investigation.

A further sale of LA Fitness gyms could on be on the cards if Fitness First wins the current bidding process, said the person.

Sports Direct has also been linked to the sale of the remaining LA Fitness gyms. Estimates of the value of LA Fitness have ranged from £60m to as much as £80m.

Discount gym chain Pure Gym, which has the majority of its estate in the north and Midlands and is owned by US private equity firm CCMP, is also in the running.

Competition authorities blocked Pure Gym's merger with The Gym Group last year. The overlap with LA Fitness is confined to a handful of gyms in north London.

About £15m to £20m of investment over two years is needed to refurbish LA Fitness's gyms, according to a person familiar with the bid process, who believes that up to £8m of overhead costs could be stripped out in a takeover by a rival gym operator.

Terra Firma and LA Fitness declined to comment.

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