A deadline for private-equity firm Forstmann Little to sell 24 Hour Fitness, San Ramon, CA, is less than three months away.
As The New York Times reported last year, Forstmann Little is contractually required to sell its three remaining assets—including 24 Hour Fitness—and return proceeds to its limited partners by June 30, 2012. Forstmann Little bought 24 Hour in 2005 for $1.6 billion.
24 Hour’s immediate future was one of the topics of discussion at last month’s International Health, Racquet and Sportsclub Association (IHRSA) conference and trade show in Los Angeles. Rick Caro, president of Management Vision, New York, moderated the 16th annual IHRSA financial panel and was joined by DJ Belock of Goldman Sachs, Matt Shafer of private-equity firm Vision Capital Americas, Brian Maier of Wells Fargo Securities and Mark Harms, chairman and CEO of Global Leisure Partners in the UK.
Harms told attendees at the session that a likely exit for Forstmann Little would be either this year or next year. A few days after the conference, Caro clarified this statement by saying Forstmann Little is working with its investors to get a waiver to extend the deadline for one year.
“That doesn’t mean that they couldn’t close on July 1 of this year (if Forstmann Little gets an extension),” Caro said. “It means they don’t have to have a deadline date this year, which would be suboptimal for everyone.”
When asked about the future of Forstmann Little’s ownership of 24 Hour, a company spokesperson released the following statement to Club Industry: “As a matter of practice, 24 Hour Fitness as a private company does not provide information on corporate financial matters. We have greatly benefitted from the sound counsel and ownership of Forstmann Little & Co. over the past six years, and as a result, our business is well poised for continued success. The management team continues to focus on building shareholder value and positioning the company for long-term growth.”
Forstmann Little’s other assets, according to Bloomberg News, are IMG Worldwide Inc., a sports and fashion marketing company, and ENK International, which runs trade shows for the fashion industry. Julian Robertson was appointed chairman of Forstmann Little following the death of Ted Forstmann last November.
As for the rest of the industry, the panel expects more merger-and-acquisition activity after last year’s deals that involved Equinox, Life Time Fitness and LA Fitness.
“That doesn’t always mean big guys eat up little guys,” Caro says. “It means maybe little guys want to get out. It’s not always a bad thing just because there’s a big guy out there who might have the appetite that they didn’t have a few years ago.”
Overall, the financial outlook for the industry is brighter, Caro says.
“The sense I got not only from the financial panel but just talking formally to a lot of people was that they were clearly optimistic about the near future, but not ebullient,” Caro says. “They’re realistic, but they’re really thinking things were going to get better. There was a better feeling than I’ve felt for the last four or five years.”