Viva Leisure diversifies with $2m investment for 34% stake in Boutique Fitness Studios

Australian health club group Viva Leisure (ASX: VVA) has announced plans to diversify its business with a $2 million strategic investment and equity interest in premium fitness and wellness company Boutique Fitness Studios.

The “economically compelling” investment will be fully funded from Viva’s existing cash reserves and available bank facilities, with the company also offering Boutique a maximum $600,000 convertible note at 8% interest over a 24-month term to assist with its growth plans.

Upon completion, Viva will become Boutique’s largest single shareholder with a 34% stake.

Optional acquisition

Viva’s investment includes an option to acquire Boutique’s entire business within the next two years for $5.8m and integrate its own technology including payments system Viva Pay, member management platform The Hub and in-development product Viva Pass.

Viva will also work towards introducing other systems such as door control, multi-brand access and digital signage to enhance member experience and operational efficiency across the expanded studio network.

In the event of a full acquisition, Boutique’s founders will remain with the business and have an earn-out opportunity to continue its Australian growth and launch operations in New Zealand.

Diverse brand portfolio

Boutique Fitness Studios is a significant player in the Australian fitness space and holds the Rumble Boxing, Club Pilates, StretchLab and CycleBar brands under licence from Xponential Fitness, which is the world’s largest franchise group of boutique health and wellness brands.

Boutique currently has 48 operating studios and 106 licences across all four brands.

It has plans to open 25 new studios over the next year, generating overall sales of approximately $25m per annum.

Revenue growth

Viva managing director Harry Konstantinou said the investment in Boutique would help realise further revenue growth from operating synergies.

“This investment will expand our network to over 400 locations across multiple disciplines and brands, enhancing our diverse offering while introducing a new market for Viva Pay and other Viva technologies,” he said.

“We look forward to working with the Boutique team and the wider Xponential Fitness team to grow their brands in Australia and New Zealand.”