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O.C.-based LA Fitness buys rival Bally

The $153-million deal gives the Irvine-based company more than 500 locations throughout the country.

December 12, 2011|From the Los Angeles Times
  • Bally Total Fitness in Inglewood along with 170 more Bally Total Fitness locations nationwide are being purchased by LA Fitness one of the largest fitness club chains in the country.
Bally Total Fitness in Inglewood along with 170 more Bally… (Anne Cusack, Los…)

LA Fitness, one of the largest gym chains in the country, has become an even more dominant player in the health club industry.

The Irvine-based company last week took over 171 Bally Total Fitness locations in 16 states, including about 40 in Southern California, marking one of the biggest deals by a gym chain in recent years.

The $153-million purchase, which gives LA Fitness more than 500 locations nationwide, is a smart move, experts said.

LA Fitness picked up tens of thousands of members in prime markets. And with the labor market improving in California and nationwide, the chain is betting that it can attract consumers who might have canceled their memberships during the recession back to the gym, analysts said.

"LA Fitness has been a steadily growing company, and this is a huge splash," said Stuart Goldman, managing editor of Club Industry, a trade magazine that publishes a yearly list of Top 100 fitness clubs. "Once the dust settles, LA Fitness could emerge as the largest."

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Executives at the privately owned LA Fitness declined to comment. Three private equity companies — Siedler Equity Partners, CIVC Partners and Madison Dearborn Partners — own a majority of the company.

To attract new members, Goldman said LA Fitness was likely to upgrade the former Bally gyms, many of which are dated and worn. He said the chain may be positioning itself to go public in a few years as its private equity owners look to profit from their investment.

In 2010, LA Fitness generated around $1 billion in revenue, according to estimates by Club Industry.

Once considered a titan in the industry, Chicago-based Bally has had a troubled history — two bankruptcies, legal settlements over allegedly unethical sales tactics and a reputation for shoddy accounting. Even with several changes in leadership, the beleaguered company struggled.

Bally generated about $550 million in revenue in 2010 — a 48% drop from 2006 — when its sales topped $1 billion, Goldman said.

At its peak, Bally operated more than 400 fitness centers in the U.S., Mexico, Canada, China and the Caribbean. Experts said shedding locations would help the company strengthen its finances and rehabilitate its flagging reputation. After the sale, Bally will emerge debt-free and will operate about 100 gyms with 800,000 members.

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