Pure Gym and The Gym Group today announced plans to merge, subject to regulatory approval. The new company will be a combination of the current Pure Gym, owned by CCMP Capital Advisors, and The Gym Group owned by Phoenix Equity Partners and Bridges Ventures. Financial terms have not been disclosed.
The two low-cost gym brands, which presently operate 103 gyms across the United Kingdom, will aim to create a single unifying brand to bring their affordable, 24-hour and no-contract gym experience to consumers in more towns and cities.
As I discussed in my recently published 2013 Review of the UK Health and Fitness Industry and Outlook for 2014, building a greater geographic reach is the next logical strategic move for both companies, which this proposed merger helps to deliver.
The terms of the merger agreement state that John Treharne, current CEO of The Gym Group, will become CEO role of the enlarged company, while Peter Roberts, Chief Executive of Pure Gym, will become Executive Chairman. Peter Roberts said: “This agreed deal unites two innovative players in the fast-changing gyms sector, where the low-priced model is improving consumer choice and contributing to better exercise levels across the country. We expect our complementary brands and locations to encourage even more people to join gyms.”
John Treharne, Chief Executive of The Gym Group, added: “Customers want total flexibility and value-for-money options when it comes to keeping fit. This enlarged business, combining great facilities and excellent trainers, will provide a compelling alternative to existing gym providers.”
The two companies will continue to operate independently until regulatory approval and completion terms are finalised. My understanding is that the regulator’s decision should be made towards the end of March 2014. The regulator must assess whether the enlarged business will lead to a significant reduction in competitive activity and therefore adversely affect consumers. However, the way I see it, is that when two highly efficient low-cost gym businesses come together, prices for consumers are more likely to go down than up.
What do you think about the proposed merger? Please do leave a comment.