Esporta shares boosted by takeover approach

Duke Street Capital, the private equity company, was yesterday among the front-runners expected to table a takeover bid for Esporta, the troubled health and fitness group, after it trebled its shareholding to 11 per cent.

Esporta, issuing its second profits warning in three months, confirmed it had received a number of approaches but no firm offers. The takeover speculation helped Esporta's shares, which have plunged from last year's high of 119.5p, rise 4.5p to 71p.

Analysts said other likely bidders for either the whole company or selected sites included Next Generation, David Lloyd's privately owned fitness club group, and Whitbread, the leisure group that owns the David Lloyd Leisure fitness chain, which it acquired from the former tennis star in 1995. The property tycoon John Beckwith is also understood to be interested. Any offer is expected to be in the region of 75p to 80p a share, valuing the business between £125m and £132m.

In a disappointing trading update, Esporta said that fourth-quarter revenue lagged expectations by 4 per cent, which would knock profits before expectations because of the business's high operational gearing. Analysts yet again downgraded this year's forecasts, also slashing about 15 per cent from next year's.

The profits warning overshadowed the news that Esporta had hired Maurice Kelly as chief executive to replace Graham Coles, who was ousted last October. Mr Kelly, who starts immediately, joined from the easyEverything internet cafes chain and has spent seven years at Granada where he managed health and fitness clubs. He will earn £220,000 a year.

James Ainley, a leisure analyst at Dresdner Kleinwort Wasserstein, said Mr Kelly was "an unknown quantity" who would have his work cut out. Esporta's management team has struggled to gain City credibility ever since it was spun out from Michael Grade's First Leisure group in 2000.

Esporta revealed that profits would be further hit by exceptional second-half charges totalling about £11m. This comprises £1m relating to senior management changes, £4m to cover the redemption of resaleable memberships at one London club and a £6m asset writedown of five clubs following poor trading.

Michael Cairns, a non-executive director, said the main problems were low levels of new joiners and a high attrition rate at its Spanish clubs.