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Cannons backs out of merger with Holmes Place
The 200p per share takeover bid for Holmes Place by rival health club operator Cannons Group has collapsed.
Shares in Holmes Place fell by 69p to 102p after the announcement that Cannons had withdrawn its £202m bid, a decision attributed to a downturn in trading at Holmes Place leading to a profits warning.
Holmes Place said that since its interim results issued on 4 September - in which it was reported that competition in the health and fitness market was increasing in the UK and that City clubs were undergoing a period of uncertainty -trading had been below expectations as a result of lower retention rates and fewer joiners than expected.
'Having previously anticipated a satisfactory outcome for the year, the Board now believes that results for the full year may be significantly below its earlier expectations,' the company said.
Cannons is expected to put forward a revised merger proposal but it is likely to be at a price below the company's current share price, an offer Holmes Place says would not give full value to shareholders.
In September, Holmes Place turned down a proposal by another bidder in favour of pursuing the Cannons bid, but is now thought to be investigating whether the unsuccessful party- believed to be Bridgepoint Capital - is still interested.
City analyst, Nick Batram, said: 'When a company spends a lot of time looking at a corporate transaction, more often than not the company suffers. The positive side of the downturn in the health and fitness market is that it is going to force operators to look at themselves and concentrate on their businesses and business models which have been neglected in favour of consolidation and aggressive expansion plans.'