PE-backed gym merger collapses

The proposal was abandoned after an investigation by the Competition and Markets Authority (CMA) raised concerns over the impact the merger could have on gym membership costs and quality of service.

According to reports, the gyms' private equity owners were concerned that the extended investigation into the plans could negatively impact both companies and have since decided not to go ahead with the merger.

In February this year, CCMP, Phoenix and Bridges announced plans to merge Pure Gym and The Gym Group, in order to create a 100-site low-cost gym group in the UK.

The proposal was then investigated by the CMA, which in a surprising move referred the investigation for an in-depth (phase 2) investigation. The first investigation found that the merger could lessen competition at both a local and national level.

Pure Gym was acquired by CCMP in May 2013 in a secondary buyout from Magenta Partners. In 2010, the group received a £6m investment from Magenta in a £10m funding round.

Established in 2008 in Ripon, Yorkshire, Pure Gym manages a chain of low-cost gyms that do not require its members to set up an annual membership contract.

In the year to February 2013, Pure Gym recorded turnover of £30.6m and EBITDA of £8.4m. It employs 100 people and operates 45 gyms.

Bridges sold its majority stake in The Gym Group to Phoenix in June 2013, generating a 3.7x money multiple and a 50% IRR. It is understood the sale to Phoenix valued the group at around £90-100m, with £50m of fresh equity injected. Bridges first invested £1m in the The Gym in 2008, and later led a £20m funding round supported by a revolving credit facility from HSBC.

The Gym was established in 2007 and was incubated as a start-up by Bridges. It now operates 42 low-cost gyms throughout the UK. Last year it reported EBITDA of £10m.

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• Topics
• UK / Ireland
• Portfolio management
• Bridges Ventures
• Phoenix Equity Partners
• United Kingdom