Goldman Sachs increases investment in Russian fitness chain World Class
Goldman Sachs' private equity branch Special Situations Group (SSG) is raising its stake in high-end Russian gym chain World Class, expecting lifestyle spending to grow in Russia despite slowdown of economy.
SSG and Russian bank VTB will buy out a stake owned by Alfa Capital Partners, an investment unit of billionaire Mikhail Fridman's Alfa Group, and will jointly own 50 per cent of the business. SSG previously owned 12.5 per cent of the chain in which it first invested in 2006. Details of the deal have not been disclosed.
"We like the business, it is an established platform - one of the most well-known brands in Russia and it operates in the premium segment," said Maxim Klimov, head of Goldman's European SSG in Russia. Klimov believes that World Class has a loyal customer base which will give the business persistence despite an economic slowdown and slide in the ruble currency.
"As in Russia the demand for fitness services still significantly exceeds the supply, we expect that the market will continue to grow at the same pace in the future," says Andreas Besenberg from VTB Capital, VTB’s investment arm.
World Class was founded by former fencing champion Olga Sloutsker and is part of the Russian Fitness Group, which also runs the FizKult chain. The Russian Fitness Group owns 60 clubs in 22 cities, of which 26 are World Class clubs, and has approx. 150,000 members according to the EHFA/Deloitte European Market Report 2013. According to Sloutsker, the company plans to open nine more clubs this year in Russia and the Commonwealth of Independent States. A World Class membership costs around $2,500 a year. The Russian Fitness Group is one of the major players in the Russian fitness market next to fitness companies such as Alex Fitness, Orange Fitness, City Fitness, or X-Fit.
Goldman Sachs’ managing director Anton Schreider said that the transaction is “a further demonstration of Goldman Sachs’s long-term commitment to investing in Russia as well as our flexible investment mandate allowing us to back strong local businesses over extended time horizons.” Rather than making use of traditional private equity structures which means raising funds from third parties, SSG invests the bank's own money. That allows it to operate smaller deals below $50 million that would normally fall outside the scope of larger buyout firms, said Klimov.
Source: Reuters, Bloomberg
Picture: World Class