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SBD Global/May 15, 2014/Finance

Retailer Sports Direct In Talks To Buy 30 LA Fitness Gyms In U.K.

Sports Direct Founder Mike Ashley "has sanctioned a move to acquire the leases on approximately 30 LA Fitness sites which were put up for sale as part of a restructuring of the troubled gym operator's finances," according to Mark Kleinman of SKY. Ashley is said to "have agreed to offer a parent company guarantee to LA Fitness landlords in order to fend off interest from rivals, and a deal is understood to be imminent, although one insider said on Wednesday that it could still fall apart." If completed, it would "mark the fulfilment of a long-held ambition" of Ashley, the owner of EPL side Newcastle United, to "break into the lucrative health and fitness sector." Sources said that Sports Direct "was attracted to the complementary nature of gym operations and sports goods retailing given its ownership of brands such as Dunlop, Everlast and Slazenger." It owns fashion brand LA Gear. LA Fitness, which had been owned by Mid Ocean Partners, a private equity firm, since '05, "has endured a difficult period amid the rapid growth of lower-priced competitors" (SKY, 5/14). In London, Felsted & Blitz reported if Ashley lands the deal "it would emulate the path" taken by League Championship side Wigan Athletic Owner Dave Whelan, founder of JJB Sports, who acquired 50 of JJB’s health clubs in '09. Ashley is "understood to have sounded out his old sports retail adversary about his DW Fitness Clubs." Although Ashley bought the JJB name and parts of the business in '12, he "has been unable to prise the gyms from Mr. Whelan’s hands." Sports Direct "declined to comment." David Minton, of fitness industry monitor Leisure Database Company, said that a deal "could lead to Sports Direct becoming the largest fitness brand in the UK within two years." Minton: “Sports Direct has over 600 stores in Europe including 400 in the U.K., and many of these could have either extensions or mezzanines added for a fitness club very quickly” (FINANCIAL TIMES, 5/14). In London, Sean Farrell reported the LA Fitness gyms for sale "span the country and include branches in Glasgow, Belfast, Liverpool and the south-east." The firm is selling the sites "under a company voluntary arrangement with its landlords." The sale "will leave the struggling fitness chain with 47 gyms and reduced debts" (GUARDIAN, 5/14).
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