The Viva Leisure Ltd (ASX: VVA) share price is trading lower on Tuesday morning.
At the time of writing the technology-focused Australian health club owner and operator's shares are down 1% to $2.85.
This follows the announcement of the successful completion of an institutional placement this morning.
What did Viva Leisure announce?
Viva Leisure announced that it has successfully raised $20 million through a placement to institutional investors.
Approximately 7.5 million new Viva Leisure shares are to be issued at a price of $2.65 per share. This was an 8% discount to the last close price.
Management advised that the institutional placement was strongly supported by both existing shareholders and new investors. This includes several new large institutions that will be introduced to the Viva Leisure share register.
Why is Viva Leisure raising funds?
The proceeds of the placement will be used for the acquisition of FitnFast health clubs, new site rollouts, cash-backed bank guarantees for new property leases, and working capital flexibility.
In respect to the FitnFast health clubs, Viva Leisure has executed a binding business sale agreement for 13 FitnFast health clubs for an upfront consideration of $13.5 million.
FitnFast was founded and opened its first location in 2010 in Penrith, New South Wales. Its original focus was on the low cost, big-box model of health clubs. It was a pioneer in the sub-$10 per week gym membership offering.
The acquired centres have a combined membership of over 21,500 members at an average revenue per member of $14.80 per week. Approximately 80% of the membership base is in New South Wales, with 13% in Victoria and 7% in the ACT.
Viva Leisure's CEO and Managing Director, Harry Konstantinou said: "The support of existing and new institutional investors is extremely encouraging. The funds raised will allow Viva Leisure to continue to implement its stated strategy and grow to be the number one health club owner in Australia and beyond."
