24 Hour Fitness Worldwide, Inc. and Forstmann Little & Co., a New York private investment firm, have signed a definitive agreement for Forstmann Little to acquire 24 Hour Fitness. The value of the transaction is approximately $1.6 billion.
24 Hour Fitness has revenues of more than $1.1 billion, more than 3 million members and 330 clubs in 16 U.S. states, as well as 15 clubs in four Asian countries. Founded in 1983 by Mark S. Mastrov, 24 Hour Fitness has leading market positions in California and other Central and Western states.
"24 Hour Fitness has a very strong market position, a superb management team and significant potential for growth, all characteristics we look for in an acquisition," said Ted Forstmann, Forstmann Little senior partner. "We believe our unique capital structure can accelerate the growth of 24 Hour Fitness' very impressive business model. In an industry that has rapidly expanded from $6 billion in the mid-1990s to more than $14 billion today, Mark has created a global brand and achieved tremendous growth. We look forward to helping him and his team keep growing the business by further penetrating existing markets and expanding into new ones."
Mastrov, chairman and CEO who will continue to lead the company with his existing management team, said, "This is an exciting day for the 24 Hour Fitness Worldwide team. Forstmann Little has been a valuable partner for many companies, and they share our vision for future growth. With Forstmann Little's strategic guidance and their advantageous capital structure, we are now ideally positioned to capitalize on the significant growth trends we see ahead in the fitness industry."
Mastrov will retain a significant stake in the business. Forstmann Little will finance the transaction with more than $900 million from its equity and subordinated debt funds with the balance through a senior loan facility. This conservative capital structure will provide 24 Hour Fitness the capital to fund internal growth and expansion in domestic and Asian markets.
The transaction, which is expected to close in June, is subject to regulatory approval. It is not subject to financing. Prior to the 24 Hour Fitness acquisition, Forstmann Little had approximately $1.3 billion in committed capital for future investments.