Richard Branson limbering up for Virgin Active sale?

After umming and aahing about a float, Branson may now flog a stake in his gym chain to private equity.

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Last Updated: 21 Dec 2010

Richard Branson has been trying to flog part of his gym chain Virgin Active for a couple of years now, but it looks increasingly likely that he might abandon the original plan of a stock market flotation in favour of a sale to a private equity firm - several of whom are apparently willing to stump up the requisite readies. Officially, management is still insisting that it wants to go for an IPO - but given the jittery state of the stock markets, and the beardy one's slightly chequered history with flotations, a sale might be a safer bet...
 
Virgin is reportedly looking to sell about a third of its 76% stake (although you'd never have guessed that it was only selling a minority share, given the amount of column inches it has generated - classic Branson). And unlike many businesses, Virgin Active has had a rather good recession, reporting a 15% rise in revenues to £391m last year; with 187 health clubs and nearly 1m members, it could now be valued at as much as £1bn.
 
Its international growth prospects look particularly good: it already has 117 clubs in countries like Italy, Spain and Portugal, and is looking to step up its expansion. Chief executive Matthew Bucknall and chairman Richard Baker (the former Boots CEO) are especially keen to push its prospects in South Africa: with 91 gyms open already (that’s 20 more than in the UK), there are apparently plans to open ‘15 to 20’ new clubs in the next five years, as well as rolling out its newly-acquired Virgin Life Care chain (this is a kind of glorified Weight Watchers, providing customers with tailored exercise and dietary programmes, as well as ‘health measurement products’). So it's no wonder private equity firms CVC Capital Partners, KKR, Blackstone and Advent are all apparently sniffing around.
 
Going down the private equity route may be a sensible decision for Branson, who hasn’t always had the greatest time with IPOs in the past. In 1996, he floated Virgin Group, but ended up taking it private two years later at the same price. His 2004 flotation of Virgin Mobile was more successful (it registered an 86% rise in share price in two years), but NTL took it private again after acquiring it in 2005. And given how wobbly the markets are at the moment - as Ocado recently discovered to its cost - selling the stake privately might be a lot less hassle...


In today's bulletin:

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Richard Branson limbering up for Virgin Active sale?
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