LA Fitness Addresses Bally Lifetime Memberships and Other Issues

Of all the times for the phones to go dead at the LA Fitness corporate office in Irvine, CA, last Thursday was the absolute worst time for the company.

Just as LA Fitness finalized its deal to acquire 171 Bally Total Fitness clubs, the windstorms that struck California and knocked out power last week also affected the phone systems at LA Fitness, Principal Paul Norris says. Several Bally members who had questions about their membership were not able to get through.

"We have been trying and struggling to get our phone system up and running here at corporate," Norris said Monday. "At any one time, only so many lines can get through. Two-thirds of our systems have been knocked out, so we have some access."

We've heard from more than a few Bally members on this blog since the deal was finalized. Some Bally members who had lifetime memberships said they were told that LA Fitness would not honor their lifetime memberships. Norris says that although LA Fitness did not acquire the lifetime members in the asset purchase, the company will honor Bally lifetime members.

"In showing good faith, if somebody comes in that's a lifetime member at the Bally facilities that we acquired, our intention is to, in spirit, honor that agreement," Norris says.

In most states, Norris adds, it is against the law for clubs to offer a contract of more than two or three years, and in some states, a lifetime membership is permitted. Regardless, Norris says the Bally lifetime members will eventually switch over to an LA Fitness contract for $1 a year.

"To prevent any potential problem—and this is our current thinking—we're going to give everyone that has a lifetime [membership] a one-year membership," Norris says, "and then we're going to give them basically a contract that renews every year at the price of $1, so that way there's some consideration and we're not in noncompliance with the laws of the state."

Norris adds the company plans to consolidate its information relating to the Bally acquisition on one page of its website, which includes a complete list of the 140 former Bally clubs that LA Fitness will operate and the 31 clubs it plans to close this month. The only two new LA Fitness clubs on the list that are not from the Bally acquisition are in Hialeah, FL (which opened Nov. 2), and Levittown, NY (which opened Nov. 19).

Two more points to address from LA Fitness. Norris says most of the employees of the acquired Bally clubs have been re-hired by LA Fitness at those same Bally clubs.

Also, Stephen Tharrett of Club Industry Consulting suggested in our Nov. 30 story that after this acquisition, LA Fitness my go public with an IPO, and that one of the company's private equity firms may want to sell their interest in the company. Norris says an IPO has not been discussed, nor does the company have any plans for one.

"The decision to make any acquisition, including this one, is made by our management team, and our financial partners have always been supportive of management's decisions," Norris says. "There have been no discussions regarding any exit by any of our partners."

Norris calls Seidler Equity Partners (almost 14 years), CIVC (more than 10 years) and Madison Dearborn (almost five years) valued partners of LA Fitness, and if any of them were to express a desire to exit, "we would naturally work with them to accommodate that request," Norris says.

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