Virgin Active buys Kauai, as Christo Wiese and others may inject R1.8bn into gym group

  • Virgin Active is buying the fast-food chain Kauai in a R581 million deal.
  • Christo Wiese’s Titan and others also plan to inject capital into Virgin Active in exchange for new stakes.
  • Virgin Active has appointed the CEO of Real Foods Group, which currently owns Kauai, as its new CEO.

Virgin Active is buying the Kauai and NÜ restaurant chains from Real Foods Group in a £28.6 million (R581 million) deal. Following a tough time in the pandemic, which left its gyms closed for months, the group has also announced that it plans to raise £88 million (R1.8 billion) from various investors.

Health restaurant chain Kauai has 204 stores in six countries, of which 108 are operated within Virgin Active gyms. Kauai first launched a store in a Virgin Active gym 18 years ago.

Virgin Active also appointed Real Foods Group CEO Dean Kowarski as its new CEO, with immediate effect. He is replacing Matthew Bucknall, who is retiring after 25 years.

The deal is expected to be concluded in coming months, following regulatory approvals. The restaurants will be combined with Virgin Active to create a wellness group, the companies said.

The merged company will help create opportunities and commercial efficiencies, the groups say. “It will enable the group to align fitness and nutrition around a single goal and provide shared data and personalized nutrition in concert with curated, accessible exercise programs.”

Capital raise

In addition, Christo Wiese’s investment vehicle Titan will invest £50 million for an 8% stake in Virgin Active. The owners of Real Foods will commit £18.2 million, which will give them 3.4% of Virgin Active.

Wiese recently received cash and a Pepkor stake worth more than R7 billion from Steinhoff as part of a settlement.

Shareholders of Virgin Active, Brait and Virgin Group will invest an additional £20.2 million, as part of the capital raise transaction. Following the transaction, Brait’s shareholding will fall from 79.8% to 67.3%, while Virgin Group will hold 16.6% and the DK Consortium 7.9%.

The combined injection of more than £88 million will be invested in existing facilities and new technology.

“Health club businesses globally have been significantly impacted by the devastating effects of [Covid-19]. However, the pandemic has driven an increased focus and acceptance of health and wellness in peoples’ lives and, with many countries finally opening up and removing residual Covid restrictions, the health club industry is starting to return to normality and capitalize on renewed growth prospects, ” the company said.

In South Africa, January and February sales have been in line with 2019 levels, while in the UK, sales since January have been above budget and 2019 levels.

“The pandemic has accelerated people’s appetite to lead a healthier lifestyle, and consumer demand is forecast to rise for the foreseeable future, creating significant growth potential,” Virgin Active said in a statement.

Virgin Active has more than 230 clubs, with close to a million members employing in eight countries. In 2019, before the pandemic, Virgin Active delivered its best year with record EBITDA of £142 million.

Following the capital injection, Virgin Active will still be left with a net debt burden of almost £444 million.

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