Richard Branson’s Virgin Active plans Australian expansion, confirms talks with venture capital firms

Billionaire Sir Richard Branson is looking to rapidly expand the Virgin Active health clubs across Australia over the next four years, with the £1 billion ($1.5 billion) business confirming talks with a venture capital company and fanning expectations for a sharemarket listing down the track.

According to The Australian, Branson plans to pour $40 million into the Australian operations, and is believed to be looking at between 20 and 30 sites across Australia, in addition to its four sites in Sydney and Melbourne.

“We now have about 300 health clubs around the world; it is a very successful business for us, and I think in Australia the Virgin brand is very strong and the health clubs have been extremely well received,” Branson told the paper.

Branson says he expects talks with private equity group CVC about a potential sale of a 25% stake to be completed within weeks, leaving Virgin with a 50% holding.

And while volatile markets are expected to defer a public listing for the time being, Branson says the business could “float any time”.

Questioned this time last year on whether there was any truth to rumours he might sell off or float the business, Branson told this reporter: “Virgin Health Clubs are a new baby and I do not sell my babies, basically.”

“We’ll be building them; we may well bring in an investor into the Virgin health clubs but that’s as far as they go,” Branson said.

“I would most likely never sell them but if I did, they’d have to fully grown adults, and that’s a good 21 years from now.”

David Ciantar, general manager for Australia of 24-hour fitness club franchise Anytime Fitness, says he’s not overly concerned by the Virgin Active plans, adding his Castle Hill club did not lose members when a Virgin store opened in nearby Bella Vista.

“Anytime Fitness operates in a different space to Virgin Active but we acknowledge who they are,” Ciantar says.

Anytime Fitness was launched into the Australian market by brother and sister team Justin McDonell and Jacinta McDonell Jimenez in 2008, and has increased its club numbers from 27 last year to 84.

It plans to open 250 clubs by the end of 2014.

Ciantar says in the fragmented Australian health club market, 24-hour businesses are gaining traction, and its main competitors would be Jetts Fitness and Snap Fitness, which also do not close.

Virgin Active offers rolling contracts with an initial commitment of four weeks, with four key offerings: memberships for students, people aged 55-plus, children aged three to 15 and flexible contracts.

Fitness First declined to comment on Virgin Active’s expansion plans.