One source shares details of the 24 Hour Fitness transaction with Club Industry. Another source says the sale could close on Friday.
On Tuesday, The Wall Street Journal reported news of a Canadian pension fund buying a San Francisco-area company. Is this the news we've all been waiting for in the fitness industry?
Well, no. 24 Hour Fitness, San Ramon, CA, was not purchased by Ontario Teachers' Pension Plan, Toronto. Not yet anyway.
Ontario Teachers' Pension Plan, according to a WSJ source, bought a more than 50 percent stake in Flynn Restaurant Group LP, a San Francisco-based franchisee of Taco Bell and Applebee's, for around $300 million.
On April 2, Club Industry first reported that Ontario Teachers' Pension Plan and New York-based private equity firm AEA Investors had agreed to terms on a sale of 24 Hour Fitness with 24 Hour parent company Forstmann Little, New York. Mark Smith, the former chairman of Town Sports International, and longtime club operator Frank Napolitano are involved in the purchasing group as well, sources told Club Industry.
In addition to Smith and Napolitano, there could be another prominent club operator involved in the group, but that has not been confirmed at this time, and the prominent club operator in question declined to comment to Club Industry.
Sources told Club Industry in April that the price of the 24 Hour sale would be $1.825 billion to $1.85 billion. Recently, a source told us that the total transaction price will be more than $1.9 billion.
For the financially advanced readers out there, the total debt put on 24 Hour Fitness will be $1.35 billion (including an $850 million term loan and $500 million in bonds), according to the source. Ontario Teachers and AEA Investors are investing $585 million—30.2 percent—in equity, adds the source. The sale is a 7.75 times EBITDA (earnings before interest, taxes, depreciation and amortization—or cash flow) multiple transaction based on $250 million in EBITDA generated by 24 Hour Fitness, the source tells Club Industry.
A spokesperson for Forstmann Little has not responded to recent requests seeking comment.
So the 24 Hour Fitness sale has not officially been announced. But you get the sense that could change soon. In fact, another source told us this morning that the sale could close on Friday, which is the end of the month. We shall see.