Leejam Sports Company announced plans to sell up to 30 percent of its shares via an initial public offering (IPO) on the Saudi Arabian stock exchange, Tadawul, next month.
The company, whose centres are known as Fitness Time, seeks to capitalise on growing awareness across the Gulf states of a need to address a health crisis. It also has an opportunity to capitalise on the liberalisation of Saudi Arabia, which has the potential to allow the growth of a new women’s fitness industry.
Fitness Centres, which opened its doors in 2005, is hoping to raise between 707.2 million and 817.2 million Saudi Arabian riyals ($188.6-218 million) through the sale of 15,715,009 shares. Here are five things about the company, and the wider Gulf region’s fitness industry, that we’ve learned from the company’s prospectus published prior to the launch of its IPO on August 1.
1. Leejam Sports Company is currently both Saudi Arabia and the Middle East and North Africa's (MENA’s) biggest fitness centre operator.
Launched in 2005 under the name Fitness Time, when the company opened its first fitness centre, Leejam Sports now operates 112 gyms - 108 in Saudi and four in the United Arab Emirates, with 31 more under development.
The first Fitness Time centre initially operated under the company name Fitness Time Establishment for Trading, opening six more centres by 2008 – one in 2006, two in 2007, and three more in 2008.
A joint stock company was incorporated the same year, with the business of Fitness Time Establishment for Trading transferred to Leejam Sports Company, with capital of 10 million Saudi riyals.
Fitness Time centres now operate in 23 cities in Saudi and three in the UAE - Dubai, Ras Al Khaimah and Ajman. The company has 209,000 fitness centre members, and is the market leader in the male fitness industry in Saudi Arabia, with 27 percent of the market in terms of memberships, and 12 percent in terms of fitness centres. Both of its nearest competitors – Body Masters (7 percent membership market share) and The Power Gym (2 percent of membership market share) also originate from Saudi Arabia.
2. There is potential for growth in women’s fitness centres in Saudi, where the government granted the first women’s fitness centre licences last year.
The impact of the removal of the driving ban on women on the nation’s car sales industry has been remarked upon, following reports of huge turnouts of women in Saudi Arabian car showrooms, in late June.
While the granting of the first licences for women’s fitness centres in 2017 may not have had quite the same international headlines, Leejam regards it as an opportunity to be at the forefront of a new market. It now operates eight women’s fitness centres under the brand Fitness Time Ladies – seven in Saudi and an eighth centre in the UAE, which was converted from what was previously a men’s fitness centre.
“The General Sports Authority (GSA) in the kingdom started granting licences to female fitness centres in July 2017 and the company expects that this will significantly increase the size of the addressable market in the kingdom,” Leejam’s prospectus stated.
“The company intends to become the leading operator of female fitness centres in the kingdom and has a detailed execution plan to essentially mirror its achievements with respect to male fitness centres.”
3. Despite government-backed health initiatives, just 13 percent of Saudis take part in sport at least once per week.
Health crises related to ‘lifestyle diseases’ – diabetes and heart disease attributed to high fat, high sugar diets and a lack of exercise – are being addressed by both the Saudi and UAE governments, as well as those in other Gulf countries.
As of 2016, just 7 percent of Saudi women and 20 percent of Saudi men (13 percent overall) participated in sports at least once per week - a figure the government wants to increase to 20 percent overall by 2020 and 40 percent overall by 2030 under its Vision 2030 initiative.
In addition, a survey of ‘active people’ aged 16-45 in Saudi showed that 53 percent of those who are currently not members of fitness centres were interested in joining one, subject to factors including time, convenience, and price.
“The outlook for fitness centre market growth is positive,” the prospectus stated.
The UAE has its own Vision 2021, under which it is placing increased emphasis on sport and physical activity as a way of improving the health of the population.
“This growing government emphasis is expected to bolster the physical activity and fitness sector within the UAE and provide further opportunities for fitness players as physical health becomes more of a priority within the national population,” the prospectus stated.
4. Expansion plans include new geographies and new segments
The company is looking to complimentary activities - personal training and eXtreme Fitness high intensity interval training (both of which are available at selected centres) - and believes it has the capabilities to continue expanding, opening multiple new centres per year, including in new territories other than Saudi and the UAE, as wholly-owned investments, partnerships, and/or franchise arrangements.
The company is also acquiring existing fitness centres to complement its organic growth plan.
5. Chairman Hamad Ali Al-Saqri will retain 60.5 percent of the equity post-IPO
In 2013, Target Opportunities Company for Trading (a vehicle owned by funds controlled by alternative asset manager Investcorp) acquired a 25.1 percent share of the company from certain shareholders.
According to the prospectus, Al-Saqri will retain his 60.5 percent of shares post-offering, while Target Opportunities’ share will be reduced to 2.6 percent, with the remaining 14 minority shareholders seeing a reduction from between 0.1 percent and 4.4 percent each, to between 0.02 percent and 3 percent each.
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(Writing by Imogen Lillywhite; Editing by Michael Fahy)
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