30% shares at high yield

Company history/background

Beginning entrepreneur wishes to take over an existing fitness club of a well-known chain each year for the next 5 years. This chain is the second largest fitness chain in number of branches in the Netherlands (after Basic-Fit). Entrepreneur is more than experienced as manager of a fitness club. He is currently in talks to complete the financing of his first club in the southernmost tip of Limburg.

Company activities

The company to be taken over has existed for over 5 years so there is already a large number of members and existing cash flow. The goal is to increase the number of members using the marketing tools of this chain so that a usual very healthy EBITDA of 30% is achieved.  Because the entrepreneur is a salaried employee and fitness clubs can no longer be financed solely with cash flow, the entrepreneur is looking for a financial business partner to realize his plans. The business partner is offered 30% of the shares for 30,000 Euros and is also asked to provide a subordinated loan of 30,000 Euros. The shares can either be ordinary shares or 10% cumulative preference shares. The ordinary shares will grow in value in the coming years, the cumprefs will remain stable in value but will receive an annual dividend of 10% on the nominal amount, thus EUR 3,000.

Unique selling points

After repayment of the bank or crowdfund loans (3 to 5 years running), the ordinary shares are repurchased by the company at a predetermined EBITDA factor and the cumprefs at their nominal value, with or without the dividend still to be paid. The expected value of the ordinary shares is very high at the time of repurchase after 6 years because the EBITDA will then be at a stable and high level. Entrepreneur has all knowledge of operating a fitness club and prefers a financial passive partner. 

Other

This chain is one of the most successful if not the most successful fitness franchise organization in the world with 5000 locations worldwide with a low failure rate. 

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