Pure Gym Weighs Up Competition
2 June 2015 by Ashton Carter
Pure Gym, the no frills fitness club, is set to buy its rival chain LA fitness. While the exact value of the deal has not been disclosed, it is believed to have been worth around £80m.
Pure Gym is based in Leeds and operates over 90 clubs across the UK that are all open 24 hours a day. They offer cardio equipment, free weights and exercise classes but forego expensive luxuries such as swimming pools and saunas in order to keep membership fees affordable. LA Fitness was founded in the early ‘90s and boasts over 128,000 members. They currently own 43 clubs which are predominantly based in London; however it is likely that these will now be converted into Pure Gym clubs.
However, before this acquisition can go ahead, it will need to be reviewed by the Competition and Markets Authority (CMA). The CMA will investigate any potential anti-competitive effects of the acquisition before it will grant its approval. For example, one factor that the CMA will consider is whether the collective market power of the company after the acquisition will allow Pure Gym to unfairly raise its prices.
This will not be an easy process for Pure Gym, but it is one that they will be familiar with as they were subject to the same review last year when they attempted to merge with The Gym Group. This merger was subsequently abandoned when the CMA referred the transaction to a more in-depth stage 2 investigation.
If the acquisition of LA Fitness also becomes subject to a stage 2 investigation, it will be interesting to see whether Pure Gym decide to pursue the purchase in the hope that it is eventually cleared by the CMA, or whether they decide to abandon a second potential acquisition in the same number of years.
If you need any advice regarding a corporate acquisition or merger, or are concerned about anti-competitive effects upon a particular market in which your business operates, please contact our Corporate and Commercial Department on 01245 584515 or [email protected]
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