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A mysterious rich lister is in the box seat to buy the Derrimut 24:7 Gym chain out of administration, potentially scuppering rival offers from nine other would-be buyers, including billionaire Adrian Portelli.
The bidder’s identity is unknown but the person has been described as someone who has “even deeper pockets than Portelli”, according to three sources familiar with the sale process who spoke on the condition of anonymity.
Nick Solomos with Adrian Portelli during an auction on The Block.Credit: Nine
News of the bidding war for the Derrimut 24:7 chain comes after a meeting of creditors earlier this week heard the group’s founder, Nick Solomos, took $15 million out of the financially stricken business.
Administrators to the group confirmed they had received 10 offers for the group, but said they couldn’t disclose who the bidders were as they were all in the process of signing confidentiality agreements.
Portelli, who has long been friends with the gold-chain-wearing gym owner, previously publicly stated his intention to buy the business out of administration.
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Derrimut 24:7 Gym and seven other associated companies entered administration earlier this month after struggling to meet debts.
The group’s 25 gyms in Victoria and South Australia, which have 230,000 members, have remained operating as administrators run a sale process for the business to help repay its creditors.
It is estimated the companies owe more than $40 million to its creditors, of which an estimated $12 million is owed in tax debts, unpaid superannuation and penalties.
The Derimut 24:7 Gym chain is a favourite of the body building set and is well known for its large gyms and affordable memberships, which before its collapse cost as little as $99 a year – well below the market average of more than $700 a year.
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An investigation by this masthead in September revealed the parlous state of Derrimut’s business, which was struggling to pay for day-to-day business expenses, including toilet paper.
At the same time, the business was also paying for staff members’ luxury cars, and large allowances to Solomos and his family.
Administrator Stephen Dixon, of HM Advisory, told the meeting of creditors the bidder was already partially funding the administration process to ensure the Derrimut business could keep its doors open to serve its large membership.
Creditors at the meeting peppered Dixon with questions about the identity of the mystery bidder amid concerns the business could be returned to Solomos.
Three sources confirmed the rival bidder in pole position was not Portelli.
Some creditors said they would be concerned if Solomos remained involved in the business in any way other than as a brand ambassador.
“I’d be loath to do business with Derrimut in the future if Nick is still involved,” said one creditor who asked not to be named for business reasons.
Another creditor who spoke on the condition of anonymity was concerned that it appeared Solomos was still driving a Lamborghini that was financed by the company.
Other creditors supported Solomos, saying the business needed his input to remain successful. They cited his entrepreneurial drive, marketing savvy and the social cachet the brand had from being associated with the supercar-driving businessman with working-class roots.
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The meeting also heard that Solomos had taken $15 million out of the business he founded in 2010 by way of personal loans that the administrator would seek to claw back from Solomos.
The administrator told the meeting this might be a hard task given much of Solomos’ property was largely in the hands of receivers appointed by banks who had lent Solomos or his businesses money.
The Derrimut 24:7 Gym business had been looking for a white knight before the collapse of his business in early November amid a push by the ATO to wind up the business over unpaid taxes.
Before the group’s collapse into administration, Portelli said he would be investing in the business but soon pulled out citing concerns about how the company was being managed.
Portelli, who has amassed a fortune estimated at more than $1 billion from his LMCT+ promotion and raffle business, said he expected his competition to come from large rival gym chains looking to expand their business in Melbourne and South Australia.
Portelli promised to preserve the Derrimut brand, which is synonymous with the little-known suburb in Melbourne’s west where the chain set up its first gym.
Large corporate groups and private equity are also thought to be interested in the chain, though there are fears the brand would not be carried on in those scenarios.
The administrator did not respond to questions about the bidding process.
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