PE backers work out gym merger

Alice Murray
12 February 2014

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CCMP Capital Advisersт Pure Gym is merging with The Gym Group, backed by Phoenix Equity Partners and Bridges Ventures.

The proposed merger is expected to take place in 40 days following a review by the Office of Fair Trading. If successful, the combined group will manage more than 100 gyms across the UK. The enlarged group will be jointly owned by CCMP, Phoenix, Bridges and management.

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 ended 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 that the sale to Phoenix valued the group at around £90-100m, with £50m of fresh equity injected. Bridges first invested £1m into 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.

Private equity has long been an investor in the gym sector, with notable deals including BC Partners' troubled investment in Fitness First. However, it is low-cost offerings that have more recently piqued the asset class's attention. In November last year 3i backed Dutch and Belgian discount gym operator Basic-Fit in a €110m deal.