Planet Fitness Inc. has signed a definitive agreement to acquire Sunshine Fitness Growth Holdings, LLC, an operator of more than 100 Planet Fitness clubs in the Southeast United States in a cash and stock transaction valued at $800 million. The fitness chain also revealed favorable membership growth trends for 2021.
Under the terms of the agreement, Planet Fitness is expected to fund the cash portion of the purchase price through the proceeds from a new series of securitized notes issued under their existing securitization financing facility and from available cash on hand. The transaction is expected to close in the first quarter of 2022, and, based on historical and anticipated financial results of the Sunshine Fitness locations, is expected to be accretive to Planet Fitness’ Adjusted Net Income per diluted share in the low double-digit percentage range in 2022. The Company expects to contribute the acquired stores and their related profitability to its wholly-owned securitization subsidiaries, consistent with its existing company-owned stores. In connection with the securitization debt financing, Planet Fitness also expects to refinance its Series 2018-1 Class A-2-I Notes, which as of September 30, 2021, had a principal balance of approximately $558 million. The acquisition and debt financing is expected to result in a slightly lower debt-to-Adjusted EBITDA ratio on a pro-forma consolidated basis.
Sunshine Fitness was the first franchisee in the Planet Fitness system and has been backed by TSG Consumer Partners (“TSG”) since 2017. Sunshine Fitness operates 114 locations in Alabama, Florida, Georgia, North Carolina, and South Carolina that will be combined into the current Planet Fitness company-owned portfolio, which is predominantly located in the Northeast. Upon closing of the transaction, Shane McGuiness, Co-Founder and CEO of Sunshine Fitness, who has been an owner and operator in the Planet Fitness system for nearly 20 years, will oversee operations of the combined corporate store portfolio.
“We are excited to announce the acquisition of Sunshine Fitness, one of our best-performing franchisees in the system, with locations that will provide geographic diversity to our current corporate store portfolio and that are in markets with a long runway for future store development,” said Chris Rondeau, CEO, Planet Fitness. “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. 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.”
Rondeau continued, “Following this purchase, we will own more than 200 corporate stores, or approximately 10 percent of our total system, allowing us to retain our asset-light business model which is an important part of our shareholder value proposition.”
“Partnering with TSG has been an incredible experience. Their support for our business and growth never wavered and it has led to this next exciting moment in our evolution as an organization,” said Shane McGuiness, CEO, Sunshine Fitness. “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.”
Michael Layman, managing director, TSG, commented, “My partner, Pierre LeComte and I have a deep understanding of and respect for Planet Fitness and its management team through our long investment and ownership history in both Planet Fitness and, subsequently, Sunshine Fitness. 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’s involvement with the Planet Fitness brand dates back to November of 2012 when TSG acquired a majority stake in Planet Fitness. For nearly five years, TSG and Planet Fitness worked together to develop the Planet Fitness brand and improve the support and value proposition for both members and franchisees. In August of 2015, Planet Fitness began trading publicly on the New York Stock Exchange. After a successful partnership, TSG fully exited its investment in PLNT as of May of 2017. In December of 2017, TSG acquired a majority stake in Sunshine Fitness.
Planet Fitness 2021 Preliminary Key Year-End Metrics
Planet Fitness ended fiscal year 2021 with 15.2 million members, an increase of 1.7 million members over the past 12 months. In 2021, 132 new stores were opened, and the company ended the year with 2,254 stores worldwide. Currently, 98 percent of Planet Fitness stores are open including 100 percent of domestic locations.
“We exceeded our expectations for both member and new store growth in 2021. 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,” said Rondeau. “There is a 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.”