Could Basic-Fit, the leader in low-cost fitness, become the ideal target for a takeover? This is the question posed by Buckley Capital Management, one of the group's main shareholders. In an open letter to the board and management of Basic-Fit, the Miami-based investment management company is calling for a strategic review and possible sale of the company.
The firm, which specialises mainly in small and mid-cap North American companies, believes that the European leader in low-cost gyms is "significantly undervalued by the public markets".
In its letter, Buckley Capital highlights the sports retailer's impressive growth since its IPO in 2016. "Basic-Fit has recorded annualised growth of around 20%, with exceptional results on all its key performance indicators", the investor points out. And this despite a difficult environment, marked in particular by the covid-19 pandemic.
Despite these "exceptional results", Basic-Fit's share price is underperforming other companies in the consumer discretionary sector (the sector that includes all goods and services considered non-essential). "Since January 2020, Basic-Fit's share price has fallen by 34%", notes Buckley Capital.
A sale valued at €17 billion
This is largely due to "an unfavourable perception of the company's financial structure and an excessive investor focus on short-term items". Buckley Capital believes that Basic-Fit would be better valued as a private company. "We do not see Basic-Fit as a financially strapped company looking to private equity for a lifeline. On the contrary, we see privatisation as a proactive opportunity for Basic-Fit to achieve a number of strategic objectives," explains the shareholder.
A sale would allow the company to focus on its long-term strategy and growth, creating more jobs, more promotional opportunities and more resources to invest in employee benefits and development, which would support shareholders' interests, according to the investor.
Buckley Capital goes on to reveal that there is "significant interest" from private equity firms in acquiring Basic-Fit. A project that could prove particularly lucrative. According to the investment firm's estimates, if Basic-Fit achieves its target of 3,000 gyms by 2030 while maintaining profitability, the company could be valued at around €17bn, an increase of more than 600% on its current market capitalisation.
While Buckley Capital has flexed its muscles by making its letter public, Basic-Fit's board and management are keeping a low profile. For the record, the company now has over 3.75m members in Europe and more than 1,400 clubs, including ten in Luxembourg.
Read the original French-language version of this report here