Bally Total Fitness to sell division
Monday, September 19th 2005, 8:29 am
News On 6
CHICAGO (AP) _ Gym operator Bally Total Fitness Holding Corp. said Monday it agreed to sell its high-end club division for $45 million in cash to an industry veteran in a key step toward turning around the business and refocusing on core, middle-market customers.
Bally, which has been working to straighten out its finances and recently had to get a waiver from bonholders because of its past due financial statements, said it agreed to sell its Crunch Fitness club division to industry veteran Marc Tascher and private equity group Angelo, Gordon & Co. The deal includes all of Bally's 21 Crunch health clubs in major cities including New York, Chicago and Los Angeles, as well as its Gorilla Sports clubs and two Pinnacle Fitness clubs in San Francisco.
Bally said it expects to close the deal in the fourth quarter.
The anticipated sale is one of the key steps in Bally's turnaround plan, which includes reducing debt and selling off assets so it can refocus on its primary business, the company said. It plans to use funds from the sale to pay down a $175 million loan.
``Although Crunch is a prestigious brand with great potential, its high-end positioning is not consistent with our core strategy, which ... heavily focuses on the middle-market demographic,'' Chief Executive Paul Toback said in a statement.
Bally acquired 19 Crunch clubs in 2001 for about $20 million in cash and nearly 3 million shares of common stock. It purchased Gorilla Sports as part of its 1998 acquisition of Pinnacle Fitness.
In August, Bally had to get a waiver from its bonholders, lasting through Nov. 30, for defaulting on notes because of overdue financial statements. The company said in July that it would be late with its 2002-2004 financial statements because of accounting issues. In February, Bally fired two midlevel executives and accused former chief executive Lee Hillman and former chief financial officer John Dwyer of faulty accounting practices.