UK mid-market firm Phoenix Equity Partners and impact investor Bridges Ventures have partially exited their stakes in The Gym Group through an initial public offering (IPO) of 50 percent of the company’s shares on the London Stock Exchange.
The company listed today with a market capitalisation of £250 million ($377 million; €352 million), according to statements.
Phoenix has sold a 32 percent stake in the low-cost gym operator, retaining a significant minority holding of 28.1 percent, it is understood. The exit generated a realised and unrealised return of 2.5x cost and a 47 percent internal rate of return (IRR).
The firm acquired a majority stake in the company for a total transaction value of £90 million in June 2013 through its Phoenix Equity Partners 2010 fund, a £450 million, 10-year vehicle, it is understood.
Bridges Ventures co-founded the gym chain in 2007 alongside its chief executive officer John Treharne. Bridges chief executive Philip Newborough became executive chairman of the business at the same time. Bridges incubated the business before selling part of its stake to Phoenix in 2013, retaining a 25 percent holding. Following the IPO it will retain a 14 percent stake, it is understood.
The offering values Bridges’ investment at 5.8x cost, it said, with the initial investment made from Bridges Sustainable Growth Fund II, a 2007-vintage vehicle, it is understood.
The firm “originally invested in The Gym in line with its focus on backing for-profit companies that are helping to address big societal challenges in areas like health and well-being” following the success of low-cost hotel and flight models, it said.
The Gym Group has 66 sites across the UK and 363,000 members as of September. It reported revenues of £45.5 million for 2014 representing a compound annual growth rate (CAGR) of 43 percent since 2012, and group adjusted EBITDA of £14.7 million equivalent to CAGR of 56 percent over the past three years, Phoenix said.
Phoenix’ partial exit follows the sale of events company CloserStill to Inflexion Private Equity in March, also from its 2010 fund, as reported by Private Equity International. The sale generated a return of 3.6x and a 60 percent IRR.
The 2010 fund has made 12 investments and more than 21 bolt-on acquisitions, PEI reported in August. Then, Phoenix managing partner David Burns told PEI in an interview that the fund had “more to go”.
The firm’s most recent investments include Bridge Leisure, Riviera Travel and Just Childcare.