LONDON, June 27 (Reuters) - TDR Capital is weighing options for its health and fitness club chain David Lloyd Leisure, two people familiar with the matter said, in a deal that could fetch as much as 2 billion pounds ($2.6 billion).
Morgan Stanley is advising the private equity firm on an auction of the asset, and has been sounding out potential investors in recent weeks to acquire a majority stake in the business.
If there is sufficient interest, TDR is expected to proceed with an auction process later this year, the sources added. But no decision has been made as deliberations remain at a preliminary stage. Officials from TDR and David Lloyd Leisure declined to comment. Morgan Stanley didn't immediately return calls.
A decision to go ahead with a sale would make David Lloyd Leisure one of the largest health clubs to come to market in Europe this year, marking a revival for an industry that was hurt badly by lockdowns in the early months of the pandemic.
TDR took control of David Lloyd in 2013 from previous owner London & Regional and Caird Capital LLP for 750 million pounds. TDR is once again seeking an exit after a decade of ownership, after failing to find a buyer in a previous auction process in 2017.
David Lloyd operates 131 clubs in the UK and Europe, offering swimming, spas, fitness classes and other sports facilities. It has 8,500 staff, according to its website.
TDR hopes David Lloyd's debt structure will entice prospective buyers, one of the sources said. David Lloyd has about 900 million pounds of loans maturing in 2027 which are "portable", meaning a new owner would not need to raise fresh debt at current interest rates to repay creditors, they added.
The firm's current EBITDA run-rate for this year is 225 million pounds, one of the sources said, indicating resilience in its underlying business model. (Reporting by Amy-Jo Crowley, editing by Elisa Martinuzzi and Sinead Cruise)