In June it made a £210 million ($330 million) buyout offer for Fitness First, a U.K.-based gym chain with clubs in Europe, Asia and Australia. Shareholders tendered more than 80 percent of the stock.
A single shareholder, however, held out: Deutsche Asset Management UK, which in fact upped its holding from 7 percent to 10.3 percent, thereby blocking the buyout under British law. Having arrived at a stalemate, the money manager and the private equity firm grudgingly decided to become partners in owning and running Fitness First.
“Our decision to invest alongside Cinven stems from our belief that the offer undervalued Fitness First, which we think will grow rapidly in coming years,” says DeAM UK chief Paul Berriman, 36. “It’s the first time we’ve resisted a buyout, but it fits with our increasing focus on long-term value after three years in which the fund management industry has been criticized for a short-term outlook that has compounded negative returns.”
Berriman may have started a trend. Fidelity and M&G Investment recently blocked a buyout offer for PizzaExpress and are now running the chain with private equity firms TDR Capital and Capricorn Ventures.
“Given opportunistically low buyout offers, you’ll see more fund managers following these examples and sticking with companies even after they delist,” says Berriman.
Still, fund managers seem to be missing an obvious opportunity: combining the pizza parlors with the fitness clubs.
