Mega Deal in the US: Private Equity Firms Buy Life Time Fitness


March 17, 2015

The year has started with some big private equity deals and another mega deal was announced in the US on Monday. Private equity firms TPG and Leonard Green & Partners L.P. announced they have bought the US gym operator Life Time Fitness. The deal is thought to value the company at $4 billion.


Competition Over the Gym Operator
The two private equity firms managed to win the gym operator in a heated competition with other companies. The Wall Street Journal reported other big consortiums were after the operator, including a group with KSL Capital Partners. Furthermore, TPG and Leonard Green & Partners are joined by another private equity firm, LNK Partners.


The gym operator was founded in 1992 by Bahram Akradi, who remains Life Time Fitness’s chairman and chief executive. The company is famous for providing opportunities to practice sports such as tennis, basketball and cycling, which typically require larger facilities. The operator has 113 fitness centres in the US and Canada. Life Time Fitness also owns a line of nutritional products and supplements, as well as a unit for organising fitness events such as cycling and triathlon competitions.


Details of the Deal
According to the press release, the cash offer of $72.10 per share represents a 7.3% premium. It values the 8% stake of Marcato around $225 million, according to Reuters. The other big owners of the company include BlackRock Institutional Trust with around 7% stake and mister Akradi, who owns 6.6% of the company. It is understood that Akradi will also make a rollover investment worth $125 million in the company’s stock. On Monday, the shares stood at $70.66.


In the press release, mister Akradi said, “There are no words to describe my gratitude for the confidence and significant commitment Leonard Green & Partners, TPG and LNK Partners have made to Life Time and our management team.” Life Time Fitness received financial advice from Guggenheim and Wells Fargo. Skadden, Arps, Slate, Meagher & Flom and Faegre Baker Daniels provided legal advice. TPG was advised by Ropes & Gray, with Latham & Watkins providing legal advice to Leonard Green & Partners.


Increased Deal Activity in the Sector
The Life Time Fitness deal comes after a busy period for the sector. There have been numerous deals in the industry in the past few months. Last year, a California-based gym operator, 24 Hour Fitness, was bought by AEA Investors, Fitness Capital Partners and a pension fund from Canada.


Furthermore, a rival for the company, Town Sports International Holdings announced recently it was “evaluating strategic alternatives including a possible sale of the company”. Leonard Green & Partners’ is also involved in another gym operator sale. Equinox, backed by the private equity firm, is reportedly planning for an initial public offering (IPO) with its spinning class chain, SoulCycle.


Business Insider analysts say that the current climate allows private equity firms to acquire larger amounts of debt once again, which explains the increased deal activity. The fitness industry itself is under a lot of pressure as competition is increasing and niche companies are taking market share away from bigger gym operators.

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