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Pure Gym and The Gym Group scrap planned merger

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Low cost health club operators Pure Gym and The Gym Group have announced the termination of their proposed merger.

The move comes in the wake of the Competition and Markets Authority (CMA) decision last month to refer the transaction to a second stage in-depth investigation, that was expected to last until the end of the year. But the gym chains have now pulled the plug on the merger, believing the protracted phase II investigation would have a detrimental effect on both businesses.

“We remain convinced of the merits of our proposed transaction, which would have made affordable gyms more widely available across the UK," said Pure Gym CEO Peter Roberts.

“But regulatory delays have created uncertainty that is detrimental for customers, employees and management. We have therefore decided to remain independent companies, pursuing separate, vigorous growth strategies.”

The proposed merger was announced in February, with initial expectations that it would be cleared by mid-April. However, no CMA decision was forthcoming and in its eventual report last month, the agency expressed concern that combining the businesses may lead to "higher gym membership prices or a reduction in quality and choice for customers".

At the time, Health Club Management editorial director, Liz Terry, who's been analysing the health and fitness industry since 1983, questioned the rationale behind the CMA decision.

"It isn't logical, The Gym Group and Pure Gym's business model depends on the low-cost pricing structure to create a competitive point of difference with other health club operators,” she said. “If they move their price point – as the CMA fears – they'll come into direct competition with so many other operators that the threat of competitiveness would be completely removed."

Terry added that the decision was another example of the government, and certain quangos, misunderstanding the nature of the leisure industry and failing to proactively support its businesses – which have become a major driver of economic growth.

The two companies will continue to operate under their current ownership structures. Pure Gym – which operates 68 UK clubs – is owned by CCMP Capital Advisors, while The Gym Group (42 clubs) is jointly controlled by Phoenix Equity Partners and Bridges Ventures.

In a joint statement, UK MD of CCMP Capital Advisors Tom Walker, and David Burns, managing partner at Phoenix Equity Partners, said: "There are more than 6,000 gyms operating in the UK offering a variety of services, at a range of prices, to more than seven million members.

"We are surprised that the CMA has concluded that a combination of two young businesses with a combined total of 110 gyms nationwide created a risk of a substantial lessening of competition."

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Low cost health club operators Pure Gym and The Gym Group have announced the termination of their proposed merger.
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