$5 billion, LV buys a Pilates studio

When domestic yoga, Pilates, and fitness centers are still struggling to recover from the shadows of defaults and closures, the investment company owned by the former world's richest man is already planning to spend 5 billion to acquire a Pilates studio.

On September 25th, luxury goods giant LVMH's private equity firm L Catterton announced that it has reached an agreement with Pilates studio operator Solidcore, to acquire a majority stake from its current owners. According to sources familiar with the matter, the transaction values Solidcore between 600 million and 700 million US dollars.

Founded before the trend

It is reported that Solidcore was established in 2013, and its founder Anne Mahlum is a serial investor in the fitness and health industry.

Different from other Pilates-based fitness concepts, Solidcore's uniqueness lies in not adopting a franchise model. In terms of course offerings, Solidcore provides 50-minute high-intensity, low-impact Pilates equipment workouts under neon blue lights.

In 2013, there were almost no boutique fitness studios in Washington, D.C., so when Mahlum introduced this new style of fitness, people were very curious. It can be said that from the first day of opening, the entire studio was very busy. With this momentum, Mahlum earned her first million dollars in the first year of operation, seizing the opportunity very luckily.

When founding the first Solidcore studio, Mahlum invested all her savings - 175,000 US dollars. She recalled, "When I first started Solidcore, no one really understood it. People not only thought it was foolish for me to invest all my money in it, but also didn't know what this exercise was. Fortunately, it is now hard to find someone in the fitness industry who hasn't heard of Solidcore."

Solidcore is known for its high-intensity classes, with a loyal membership base offline and a large following on social media, with over 5.1 million views. Especially on TikTok, many young women share videos of their flushed faces after workouts, tips on "staying committed" to classes, and amazing post-workout results, earning the brand the nickname "steroid Pilates."

In terms of business model, Solidcore adopts a combination of online and offline modes. Based on the pricing of Solidcore classes in some regions, the price for a single class is 28 US dollars, while a package of 10 classes is priced at 230 US dollars, which is 23 US dollars per class. New customers only need to pay 69 US dollars to enjoy two weeks of unlimited classes. Compared to the pricing of Pilates classes in major cities in China, this is not considered high.

In 2020, Solidcore also joined Equinox's internet fitness platform Variis, expanding its online business, with a subscription fee of 40 US dollars per month This model has enabled it to maintain a certain advantage in the competition. In terms of financial data, Solidcore is expected to achieve a profit before interest, taxes, depreciation, and amortization of $50 million in 2024, with revenue reaching $150 million.

Today, Solidcore has become a disruptive studio fitness brand with approximately 130 stores in the United States. To expand its scale, the company plans to open 25 new studios this year and expand internationally, aiming to open 250 studios globally by 2028.

From rags to riches

In an interview with Fortune last year, Mahlum mentioned that founding Solidcore transformed her from nothing to a millionaire, and it is estimated that her net worth has now exceeded $100 million.

Unlike traditional entrepreneurs, Mahlum did not stay with Solidcore to continue its growth. Last year, she sold all her shares to the investment company Kohlberg & Company, reportedly making a profit of over $80 million.

Furthermore, public information shows that Solidcore has only undergone two rounds of financing since its establishment, receiving investments from Peterson Partners and Kohlberg & Company in 2017 and 2021 respectively. This funding was used to provide capital for expansion into new markets and increase its market penetration in existing markets. This also indicates that Solidcore has a certain ability to generate revenue and good cash flow.

However, like other offline consumer businesses, Solidcore also experienced difficulties during the pandemic and took a series of measures to adapt to market changes. For example, in 2020, it chose to close all 70 studios and lay off employees. In 2021, it sold a minority stake to the private equity firm VMG Partners.

In conclusion, after a series of operations, Solidcore is currently owned by investors VMG Partners, Peterson Partners, and Kohlberg & Company.

It is worth mentioning that as early as May this year, news of Solidcore's sale emerged, with reports indicating a possible sale price of over $750 million. However, the valuation has slightly decreased, and the decision by L Catterton to take over seems to have finalized the deal.

Mahlum previously stated, "I am delighted to see Solidcore receive such an impressive valuation, which means that all investors and employees who have believed in this company for many years will receive generous returns." It is reported that the company had around 500 employees in 2023 L Catterton, a seasoned player in the fitness industry

Pilates is a popular fitness method in the United States, with a market size that has been steadily growing over the past few years, reaching approximately ten million users. Moreover, the Pilates market in the U.S. is not limited to women only, with the proportion of male Pilates practitioners increasing. For example, Equinox observed a 47% growth in male members participating in Pilates classes compared to 2019.

The Pilates market in the U.S. is mainly composed of independent Pilates studios, chain Pilates studios, and educational workshops. Chain Pilates studios such as Solidcore, SLT, Bodyrok, etc., have attracted a large number of consumers by offering specialized courses that break the stereotype of Pilates as a low-intensity exercise.

More importantly, the financial condition of Solidcore also fits well with L Catterton's target model. They typically look for companies with annual revenues of no less than $100 million, net profits of no less than $10 million, or annual growth rates of no less than 30%.

Regarding this transaction, Marc Magliacano, Managing Partner of L Catterton's flagship fund, commented, "As seasoned investors in the fitness industry, we recognize that few boutique fitness studios can match Solidcore in terms of high consumer engagement, effective planning, and operational capabilities, leading to sustainable growth."

Bryan Myers, President and CEO of Solidcore, added, "When considering potential partners, L Catterton quickly rose to the top because of our shared values and their deep industry knowledge, giving them a unique ability to accelerate our growth and success."

In fact, the fitness and health industry has always been attractive to private equity investors because companies in this industry can generate stable and predictable cash flows. Additionally, since the subsiding of the COVID-19 pandemic, with more consumers returning to offline fitness, the fate of global chain gyms and fitness studios has rebounded.

Managing $35 billion in assets, L Catterton has always been a seasoned investor in the fitness industry.

Just the day before this transaction was announced, L Catterton also led a $200 million financing round for EGYM, a Munich-based internet fitness startup, which is now valued at over $1.2 billion.

Prior to this, L Catterton also invested in upscale fitness club Equinox, home fitness company Tonal, and fitness software companies iFIT and ClassPass. Additionally, it is an investor in Peloton, indoor cycling gym Flywheel, and ballet studio Pure Barre