PE-owned Fitness First winds down in Hong Kong

In 2017, the Fitness First Hong Kong and Southeast Asia operation, then controlled by Oaktree Capital Management, merged with Celebrity Fitness, a 60-centre chain in Southeast Asia owned by Navis Capital Partners. Ownership of the combined entity, known as Evolution Wellness, is split 60-40 in favour of Navis, though the two investors held joint control.

At the time, Fitness First had 220,000 members and USD 219m in annual revenue compared to 178,000 and USD 76m for Celebrity Fitness. Combined EBITDA was expected to be nearly USD 100m. Southeast Asia expansion was a priority, given gym membership in the region was just 4.2%.

Evolution Wellness continues to operate in Southeast Asia. A source close to the situation told AVCJ that this part of the business is recovering steadily, and it made more sense to deploy scarce cashflow in a region with “a young and growing population of 650m people with rising household incomes” than in Hong Kong.

“We felt that with the political and COVID situation in Hong Kong – expats leaving, fewer workers in the central business district, and low vaccination rates meaning any semblance of normalisation is many, many months away – and with landlords that still expect to be paid, retaining Hong Kong in the portfolio would be a drag on the group,” the source added.

Fitness centres, alongside the likes of cinemas, bars, and karaoke clubs, have experienced intermittent closures over the past two years as Hong Kong imposed distancing restrictions intended to curb the spread of COVID-19. The most recent closure action was imposed in early January as omicron began sweeping through the territory.

Fitness First is the second major gym operator to enter liquidation following Goji Fitness. Other players that remain in operation include The Pure Group, which is owned by FountainVest Partners and Ontario Teachers’ Pension Plan (OTPP).

Private equity investors have interests in fitness chains across Asia. Earlier in the pandemic, there was an expectation that larger companies with more diversified footprints would hold firm as smaller peers floundered. They also took steps to maintain customer engagement through online services.

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• Topics
• Greater China
• Southeast Asia
• Consumer
• Hong Kong (China)
• Navis Management
• Oaktree Capital
• covid-19
• coronavirus