Planet Fitness to buy franchisee Sunshine Fitness in $800 million deal
Planet Fitness will own more than 200 corporate stores
Planet Fitness has agreed to acquire its franchisee Sunshine Fitness Growth Holdings in a cash and stock transaction valued at $800 million.
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According to Planet Fitness CEO Chris Rondeau, the deal will allow the company to diversify the geography of its current corporate store portfolio. Sunshine Fitness operates 114 Planet Fitness clubs in Alabama, Florida, Georgia, North Carolina and South Carolina.
"Owning corporate stores is an important part of our strategy, as it gives us both relevancy and credibility when making decisions that impact the entire system," Rondeau said in a statement. "Additionally, joining our corporate team is a management team that has built some of the highest store-level profit generating locations in our system which will enhance our corporate store leadership and capabilities."
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The transaction is expected to close in the first quarter of 2022 and be accretive to Planet Fitness' adjusted net income per diluted share in the low double-digit percentage range for the year. Planet Fitness will fund the $425 million cash portion of the purchase price with cash on hand and proceeds from a new series of securitized notes.
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Upon closing of the transaction, Planet Fitness will own more than 200 corporate stores, or approximately 10% of its total system. The operations of the combined corporate store portfolio will be overseen by Sunshine Fitness co-founder and CEO Shane McGuiness.
"We look forward to joining the Planet Fitness corporate team and being a part of the brand's next chapter, working with Chris and the broader team to drive continued success in the company-owned stores," McGuiness said.
Private equity firm TSG Partners acquired a majority stake in Sunshine Fitness in December 2017. The company previously acquired a majority stake in Planet Fitness in November 2012, but fully exited the investment in May 2017.
"We are pleased that through this transaction we will once again be a shareholder in Planet Fitness and believe it is well positioned to take advantage of the significant opportunities for growth in the years ahead," TSG managing director Michael Layman added.
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The deal comes as Planet Fitness exceeded expectations for member and new store growth in 2021. The company ended fiscal year 2021 with 15.2 million members, an increase of 1.7 million over the past 12 months, and opened 132 new stores for a total of 2,254 locations worldwide. Currently, 98% of Planet Fitness' stores are open, including 100% of its U.S. locations.
"The silver lining of the pandemic is that it opened people's eyes to the importance of fitness and overall health, and we're seeing members who are visiting our stores are visiting more frequently than in the past, demonstrating their commitment to improving their health," Rondeau noted. "There is tremendous long-term untapped opportunity for our brand to get people off the couch, which is why, as a leader in the fitness industry, we are making this strategic investment for the future."
Shares of Planet Fitness jumped 5% during Tuesday's trading session following the announcement.