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Gym and health club group Viva Leisure (ASX: VVA) is bulking up its national network through a $16.7 million deal for a 25 per cent stake in World Gym Australia, which the Canberra-based group hails as its second-largest acquisition to date.
The deal, including ownership of three World Gym corporate locations in Queensland, will also see Viva Leisure roll out more corporate locations in a 50-50 joint venture with World Gym Australia founders Mike Nysten and Jon Davie.
On top of this arrangement, Viva Leisure also holds a call option to acquire the remaining 75 per cent of World Gym Australia (WGA) within 36 months with the deal poised to create the “largest and most diversified fitness network and community in Australia”.
“With a pipeline of over 100 additional corporate and franchisee network locations already secured, the existing Viva network is expected to expand to over 583 locations, with a membership base across exceeding 587,000 members, underscoring the scale and reach of our growing fitness community,” says Viva Leisure CEO Harry Konstantinou.
The three World Gym corporate sites acquired by Viva are located at Stafford, Coomera and Underwood, which the company says enhances Viva’s presence in Queensland and “provides a scalable platform for growth”.
The move to take a strategic stake in World Gym Australia follows the $18 million acquisition of Plus Fitness in 2020 which added 190 clubs to the Viva portfolio. The deal with World Gym Australia initially expands Viva's network to more than 450 locations, with the company also planning to introduce its new membership to its in-house Viva Pay system.
Viva Leisure is also the corporate entity behind such brands as Club Lime, Hiit Republic, Rebalance and Groundup.
The latest partnership brings on board 169,000 World Gym Australia members to the Viva network, which the company says provides opportunities to “scale revenue at margin”.
“We have successfully demonstrated our ability through the Plus Fitness acquisition and integration, to assist WGA franchisees with technology and other solutions to help make their businesses and the network more profitable,” says Konstantinou.
“We are confident we will be able to replicate this success with WGA. We look forward to working with the WGA founders Jonathan Davie and Mike Nysten, and the wider World Gym International team to grow the network in Australia.”
Nysten and Davie opened their first World Gym in Sydney in 2006, bringing to Australia the California-founded brand that attracted the likes of Arnold Schwarzenegger and Lou Ferrigno as members in the 70s and 80s.
World Gym Australia currently operates 53 sites nationally, with many of them owned by franchisees.
“World Gym Australia has had tremendous growth and success over the years, and we expect to exceed all previous milestones with the support and systems now available from Viva,” say Nysten and Davie in a joint statement.
“It is a fantastic opportunity to work with Harry and the Viva team to take World Gym Australia to be the number one, large-format full-service offering in Australia.”
The $16.7 million acquisition is being funded through Viva’s existing cash reserves, debt facilities and up to $1 million of shares.
Subject to the deal being settled in the third quarter of FY25, Viva is forecasting annualised revenue to grow to more than $224 million – up from $163.6 million in FY24.
Viva says the acquisition has been struck at a multiple of 4.1 times EBITDA with annual earnings of about $4 million subject to further improvement through synergies for the corporate clubs and the master franchisee business.
Viva Leisure shares were trading at $1.415 at 12.24pm (AEDT), up 8.5c.
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