NBC Capital reaps 20% IRR from Fenix Fitness

It also met with management on a weekly basis.

This week, Brisbane-based NBC announced that it had exited its investment, having agreed the sale of Fenix to Goodlife Health Clubs - owned by ASX-listed Ardent Leisure Group - for A$60.9 million ($64 million). The deal, which is subject to landlord consent and the securing of financing on the part of the buyer, sees the private equity firm reap an IRR of 20% on its investment, which equates to a money multiple of around 2x.

According to Ardent, the purchase price is the equivalent of 4.7x the company's forecast EBITDA for 2013. "Strategically and tactically we were very strong in leading the way," said Shane Lawrence, general partner at NBC. "We provided a financial platform [supplied by Bank of Western Australia] right through the great financial crisis, despite the strange looks the banks were given the sector at the time."

NBC was in a strong position to influence Fenix ever since it entered into the company in January 2008, picking up a 65% stake as part of a proprietary buy-in management buy-out (BIMBO) transaction worth A$21 million. Back then the company consisted of four clubs, which had been in operation since 2004 as franchisees of the Genesis Fitness Clubs chain. Those clubs' founders invested alongside NBC in the deal, which was financed by roughly equal amounts of equity and debt.

It was then that Fenix Fitness was born. A new CEO and CFO were installed by NBC, while Lawrence was appointed as chairman of the board, and Bernard Stapleton, director, occupied an additional seat. Their strategy was three-fold. They wanted to bring in a corporate structure - policies and procedures; drive organic growth, and support the firm in making acquisitions. "We executed very successfully on one and two, but only made two acquisitions, because there wasn't the quality out there that we had expected," said Lawrence. "When we got into the bowels of our various competitors - the mums and dads who were out running gyms - we struggled to find good quality assets, and when we did, the pricing was often not appropriate."

Fenix thus grew by mostly organic means. Over time, NBC injected additional equity into Fenix, thereby increasing its stakeholding to the more than 80% it held up until this week. The company, which operates in Victoria and Queensland, opened its eleventh outlet on Monday, and has a twelfth under development. It now employs more than 1,000 people.

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• Topics
• Australasia
• Exits
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• Trade sale
• Australia
• Consumer