Virgin Active Gets Fit For Johannesburg IPO

Virgin Active has picked a quintet of banks to work on a flotation that will value one of Britain's biggest health and fitness chains at around £1.5bn.

Sky News has learned that Bank of America Merrill Lynch (BAML), Goldman Sachs, Morgan Stanley, Standard Bank and UBS have been hired in recent days by Virgin Active's board to work on the public listing.

The timing of a flotation has not yet been finalised, but the involvement of Standard Bank, which is headquartered in South Africa, effectively confirms expectations that it will take place on the Johannesburg Stock Exchange, reflecting the fast-growing nature of its operations on the continent.

Insiders said that BAML, Morgan Stanley and Standard Bank were expected to take the most senior roles in arranging the listing.

Virgin Active, which is 51%-owned by CVC Capital Partners, the private equity firm, employs more than 12,000 people and operates 263 clubs in nine countries, including Australia, Italy, Namibia, Singapore and the UK.

In 2013, the last year for which results are publicly available, the company had 1.2 million members, with revenue rising 5% to £653.1m and pre-tax profits up 10% to £125.4m.

People close to Virgin Active said it had had a successful 2014, with profits likely to have grown by a similar amount to the previous 12 months.

Sir Richard Branson's Virgin Group owns approximately 45% of the business, which was established in 1999, meaning that a £1.5bn price-tag would value the tycoon's stake at as much as £600m.

That would be welcome news for Sir Richard following tough competition in the UK which has seen Fitness First close a number of sites and LA Fitness, another rival, being put up for sale.

If it does float, Virgin Active would be the third venture part-owned by Sir Richard's holding company to sell shares publicly in a matter of months.

Last year, Virgin America, the domestic US airline, and Virgin Money, the UK bank which acquired the assets of Northern Rock from the Government, listed in New York and London respectively.

STJ Advisors, a firm which helps companies organise stock market flotations, was brought on board by Virgin Active during the first half of 2014.

Reports last year suggested that Virgin Active would consider an offering of shares to retail investors, although with a London listing now less likely, it is unclear whether that will form part of the company's plans.

In December, Virgin Active appointed Simon Susman, a veteran of the South African corporate scene, as its new chairman.

Mr Susman, who also worked for Marks & Spencer in the UK, replaced Richard Baker, the former Boots boss who now chairs Costa Coffee's owner, Whitbread.

Virgin Active and CVC declined to comment on Thursday.