15 Dec 2021
Pure Gym signals global ambitions with £300m cash injection from KKR
BY Liz Terry
Pure Gym has dropped plans for an IPO which it revealed in August, opting instead to raise £300m through an equity deal with investment firm, KKR (www.kkr.com).
In addition to reducing the company's debt levels, the funds will support PureGym’s growth plans, which include aspirations to scale globally via organic growth and franchising, as reported by HCM in August.
Pure Gym says KKR will become a 'significant minority investor' in the business, with current backers, Leonard Green and Partners, retaining a 'majority ownership position'. The two firms already have a number of shared investments.
When combined with existing resources and credit lines, Pure Gym will have access to approaching £500m of capital after completion of the deal.
These funds will be used to drive growth through the opening of more sites in Pure Gym's current markets – Denmark, Switzerland and the UK – while supporting entry into new markets such as the US, where three trial gyms are about to launch.
The company is also developing its international franchise product, with a deal already in place for Saudi Arabia and says it's in early-stage discussions with potential franchise partners in Asia, as well as having plans to develop its consumer-facing digital fitness products.
In addition, Pure Gym will invest in its award-winning tech platforms: "Pure Gym has always applied technology innovatively and intends to remain at the vanguard of the world’s technology-enabled gym and fitness operators," says CEO, Humphrey Cobbold.
"To have investors of the calibre of KKR and LGP supporting our business is a testament to the extraordinary efforts of every single colleague across our enterprise," he continued. "It's also an endorsement of our overall strategy, which is to become one of the leading players in the rapidly developing world market for gyms, fitness and activity.
"At PureGym we're driven by a clear mission and purpose of inspiring a healthier world by making activity affordable and accessible to millions of people," said Cobbold. "We have a clear and deliverable growth strategy to ensure we succeed in this mission.
"With health and wellbeing rising to the top of the global agenda we now have the capital, the capabilities, the technology and the management team to become a global fitness and activity operator,” he said.
With these ambitions and a warchest, Pure Gym will also be on the lookout for suitable M&A opportunities and – given the volatile state of the market in some parts of the world – we can also expect to see growth by acquisition.
Pure Gym has been signalling its intention to ramp up expansion for some time. In June, Pure Gym MD, Rebecca Passmore, told HCM the bounceback was going better than expected and in November, the company reported that revenues for 2021 were ahead of the equivalent period in 2019, with profits recovering from the challenges of the pandemic.
The company had a tough time during lockdowns, losing £4m a week when gyms were closed and Cobbold has been a powerful advocate for the sector, appearing on national TV to argue the case for health clubs being an essential service.
Existing shareholders will see a dilution with this deal, but the cash injection will unlock growth to ramp up profits in the short to medium term with an IPO the likely eventual exit.
Ultimately, the subscription model – whereby companies can switch on a pipeline of payments on reopening – is turning out to be highly attractive to investors.
Blaine MacDougald, partner and co-head of KKR's Strategic Investments Group, remarked: “We've followed Pure Gym closely over the last few years as it emerged as an outstanding performer in its sector, with an experienced management team well positioned to take advantage of the global opportunity in health and wellbeing.
"This investment provides flexible capital to support its growth and international expansion and we'll draw on the full range of KKR’s global platform and operational resources to help them drive further success for the business.”
Kris Galashan, a partner at Leonard Green and Partners, said: "Today’s capital-raising represents a significant development in the company’s journey and we're delighted to be working alongside KKR – one of the world’s leading investment firms.”
In addition to Pure Gym, KKR (Kohlberg Kravis Roberts and Co LP) has invested in businesses including ERM, Citation, Viridor, John Laing, Trainline, Darktrace and wellness company, The Hut Group among others.
It has a strong global focus on consumer industries, with investments in Europe including Upfield, Roompot, Wella, Alliance Boots, SMCP.
Pure Gym says closing of the investment remains subject to the satisfaction of customary conditions.
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