Australia’s gym sector is set for a shakeup with Viva Leisure (ASX: VVA) to acquire Australian Fitness Management (AFM) and its 197 franchised Plus Fitness locations which will leapfrog Viva to become the third largest operator in the country. 

Across their 197 clubs, Plus Fitness has a combined membership of approximately 175,000 members with the clubs generating more than $100 million in annual revenues. 

Combined with Viva’s existing Club Lime brand of gyms, Viva will boast 280 owned and franchised clubs with more than 270,000 members to make it the 3rd largest group by members. 

 “The acquisition of the Plus Fitness brand, systems and Master Franchisor, including the Master Franchise licence for New Zealand, and a first right of refusal on the existing 197 locations makes this the most exciting and largest opportunity in our history,” said Viva Leisure CEO, Harry Konstantino. 

“It expands on and continues to cement Viva Leisure’s position as a leading and fast-growing health club owner and operator in the Australian market.”

As consideration for acquisition of all shares in AFM, Viva Leisure will pay $18m upfront with up to $2m payable if KPIs are met over the next 12 months. The acquisition is also subject to lease and sublease arrangements which are expected to be completed by 31 August 2020. 

Within the strategic rationale for the acquisition, Viva will also acquire access to more than 40 new locations which AFM had been working on, as well as opportunities to expand through New Zealand and Asia where AFM operates but Viva does not. 

Viva Leisure is expecting to report EBITDA of $2.5m for FY20 which does not include any of the acquisition expenses or operational efficiencies to come through vertical supplier integration. 

Australian Fitness Management was founded by John Fuller and Nigel Miller in 2009 with both to join Viva as part of the acquisition. 

Once all Plus Fitness locations are integrated into Viva Leisure, the Company has plans to develop their hub and spoke model to target 500 clubs and 500,000 members in multiple countries.