Health and Racquet heads for Virgin territory

Published Dec 15, 2000

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Britain's Virgin Active Holdings said on Friday it had acquired South Africa's Health & Racquet Club (H&RC) chain for R319,6-million rand from owners LeisureNet, now liquidated.

"South Africa is a priority territory for expansion ... I am delighted that we can make an offer which should protect most of the jobs and clubs," Sir Richard Branson, the chairperson of the Virgin Group of Companies said in a statement.

He added that former president Nelson Mandela had asked him to intervene to save the 85-gym chain.

The sale of the H&RC chain follows the recent liquidation of parent company LeisureNet, which collapsed under debt estimated at R900-million mostly accumulated during a rapid expansion in Europe and Australia.

Virgin Active criticised H&RC's business model, including heavy discounting on membership fees, its aggressive sales strategy and tactics that led to a loss of focus and poor financial management.

Virgin Active and South African health insurer Discovery Holdings had been touted as potential buyers of the group's assets.

Discovery had a strategic link with LeisureNet in the form of club membership subsidies for 60 000 of its clients.

Analysts have said the 85 gym clubs have huge earnings potential, although many feel it underpriced its product.

Branson said the H&RC gyms would be revamped and stamped with Virgin's image.

"Whenever we launch a new product, people expect us to come up with something a bit different, knowing that we will give them better quality and value than before. Virgin Active will do exactly that in South Africa," he said.

Virgin Active managing director Frank Reed said the company would replace the existing Health & Racquet gym image with "a totally new Life Centre concept".

"This includes state-of-the-art equipment, Virgin Cosmetics and beauty treatments, Life Libraries and Internet stations," he said. - Reuters

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