Smart Fit Double Over Panama
Smart Fit has just announced that it is buying the 50% it still does not own in Sporty Panamá, the joint venture created in 2020 which operates the Smart Fit brand in Panama and Costa Rica. Sporty Panamá has 28 gyms and its annual net income was $22 million in the third quarter and its EBITDA was $10.9 million. Smart Fit is paying $59.3 million for participation.
The acquisition has now taken place because the other joint venture shareholder has exercised the put option. In total, Smart Fit will shell out $79.9 million for the company, taking into account the $19.9 million already invested. This value is approximately 7.3x annualized EBITDA for the third quarter, less than the multiple that Smart Fit itself currently trades on the stock exchange (approximately 10-11x 2023 EBITDA).
The acquisition will be paid for in two installments: the first for $25 million this month; The second is in a year. The acquisition is relatively small for the size of the company, which owns 1,157 gyms and generates annual revenues of around 3 billion reais.
“The deal is very good,” said a longtime executive at the newspaper, given the low valuation of a fast-growing company and almost zero funding required. “The second part of the acquisition, Smart Fit will be able to pay virtually solely through cash generation from the acquiring company.
” For this executive, the acquisition is also positive because it shows that Smart Fit has an “exhaust valve”. “Although investing in Brazil is questionable to say the least, there are many other markets where it can allocate capital with good returns,” he said. Today, approximately 50% of Smart Fit’s revenue comes from outside of Brazil, including markets like Mexico, Chile, Colombia and Peru.
Smart Fit said Sporty’s plan is to continue to grow organically in the two markets in which it operates. The company is valued at 7.4 billion reais on B3. The action fell by more than 7% around 1 p.m. in the context of a general decline in the stock market, investors being disappointed by the first measures taken by the Lula government.