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Pure Gym plans to raise £190 million in IPO

14 Sep 2016

Pure Gym, the leading gym operator in the United Kingdom in number of gyms and members, intends to raise £190 million (€223.7m) through a float on the London stock exchange.

Driven by its disruptive, low-cost and technology-enabled concept, the operator established by entrepreneur Peter Roberts in 2008 had 163 gyms at the end of June, with 785,770 members paying an average monthly fee of £19.79.

Pure Gym reported sales of £125.2 million (€147.4m) and a gym site adjusted EBITDA of £41.0 million (€48.3m) in 2015. With 27 gyms opened in the first half, including 16 conversions of LA Fitness gyms acquired in 2015, the group posted a sales increase of 51% to £76.6 million and a rise of 44% in group adjusted EBITDA compared with the same six months last year (excluding non-recurring items relating to the acquisition of LA Fitness).

Humphrey Cobbold, the group’s chief executive, told Fitness News Europe that the company’s shares could be listed on the main board of the London stock exchange in October, assuming it decides to go ahead with the initial public offering (IPO) after the setting of the price range in a couple of weeks and the subsequent road show.

Pure Gym said that the proceeds, together with loans under new banking facilities, would be used to repay existing bank debt in full, to reduce net leverage and support profitable expansion.

The operator estimates the potential for low-cost gyms in the U.K. at about 950 value gyms and 3.5 million to 4.5 million members, compared with 1.9 million members at 450 gyms in March 2016.

It was reported early this year that Pure Gym appointed Rothschild to study various options for its ownership. Pure Gym was acquired in May 2013 by funds advised by CCMP Capital Advisors, an American private equity fund, Hermes GPE and some of the gym operator’s managers. The next year it attempted a tie-up with The Gym Group, which was thwarted by the competition authorities. In May 2015 the company bought the LA Fitness Group and its 43 gyms – retaining 31 of them.

The primary offering would consist of newly-issued shares but the company added that the IPO may include a partial sale of shares held by current shareholders, which include members of the management, other individual shareholders and funds advised by CCMP and Hermes GPE (through an entity called Gym Bidco). The company and selling shareholders would target a free float of at least 25% immediately upon admission, the group added, with an over-allotment option of up to 15%.

Pure Gym intends to open about 38 gyms this year, including about 20 new gyms and 18 conversions of former LA Fitness clubs. The plan for next year includes about 25 to 30 openings (excluding potential conversions) and 20 to 25 per year over the medium term.

The company added that the Irish market is “likely to be well suited to the Pure Gym customer proposition and operating model” and that “a number of other international markets” could provide extra opportunities for the group.

However, Cobbold emphasised that Pure Gym is “very focused on maximising the potential in the U.K.,” and that there aren’t any concrete plans for entry into any other markets as yet.

The IPO plans come after the launch of The Gym Group on the London stock exchange in November, and Basic-Fit’s float on the Euronext exchange in Amsterdam in June.

The reports on Pure Gym’s potential float earlier this year suggested that, based on The Gym Group’s IPO, Pure Gym’s potential target valuation could reach £500 million (nearing €590 million).

“An IPO will enable us to be an even stronger counterparty for landlords, further raise our profile by building greater awareness of our strong brand, and provide a mechanism for incentivising the colleagues who have worked so hard to build the UK’s leading gym business,” Cobbold states in the announcement.

Read much more on Pure Gym's plans in Fitness News Europe #15.

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