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Viva (ASX:VVA) share price moves on acquisition news

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The Viva Leisure Ltd (ASX: VVA) share price climbed 2% this morning, after the company announced the acquisition of 6 health clubs in Victoria.

However, the Viva share price has since retreated from $2.99 to $2.93 – the same price it closed at on Friday.

What’s moving the Viva share price

In a statement before market open today, Viva Leisure advised it has signed a binding agreement to buy out six Pinnacle health clubs with a combined total of at least 6,500 members. The clubs are located at Caribbean Park, Mulgrave, Oakley, Parkdale, Scoresby, and Upwey.

The deal is for a consideration of between $6.05 million and $6.25 million, depending on various completion conditions. It’s expected to be completed within the next 60 days. Viva will fund it using 50% debt, and 50% equity from a recent capital raise.

Commenting on the deal, Viva Leisure chief executive Harry Konstantinou said,

The Pinnacle business is a highly complementary business to Viva Leisure, and provides attractive membership options which could be rolled out through the rest of the Viva Leisure network.

Why the purchase

The acquisition will boost Viva Leisure’s presence in Victoria from 8 locations to 14 locations.

This is consistent with the company’s strategy to own more than 400 corporate locations by 2025, up from the 79 locations it has at the end of FY20.

Furthermore, Viva said the financials for the Pinnacle clubs have been solid, with the company reporting a FY19 revenue of $7.5 million, and an earnings before interest, tax, depreciation, and ammortisation (EBITDA) of $1.75 million.

For FY20, the Pinnacle clubs being acquired reported a COVID-19 impacted revenue of $5.8 million.

What does Viva Leisure do

Founded in 2014, Viva Leisure operates health clubs in Australia. The company’s brands include Clublime, Ladies Only, Psyclelife, Hiit Republic, Swim School, GymmyPT and others. 

It also owns the master franchise for the Plus Fitness, which comprise approximately 200 clubs.

About the Viva share price

Despite disruptions as a result of the government imposed lockdowns last year, the Viva share price still returned a respectable 8% in one year.

This is after the share price lost more than 70% of its value in March 2020, at the height of the pandemic.

Viva Leisure commands a market cap of $240 million.

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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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