LA Fitness, Irvine, CA, is acquiring 171 clubs from Bally Total Fitness, Chicago, for $153 million, the companies announced today. The blockbuster deal will change the landscape of the health club industry.

The acquisition involves Bally clubs in 16 states plus the District of Columbia. The deal is expected to be completed on Nov. 30. After completion of the transaction, Bally will continue to operate its remaining 100 clubs.

The states in which the Bally clubs have been acquired are Arizona, California (Southern California), Florida, Georgia, Illinois, Indiana, Maryland, Michigan, Minnesota, Oregon, Pennsylvania, Washington, the District of Columbia and certain locations in Massachusetts, New Jersey, New York and Virginia.

A source with knowledge of the situation told Club Industry last month that LA Fitness had planned to do due diligence for more than half of Bally’s clubs. Bally reported it had 278 clubs at the end of 2010. LA Fitness had 360 clubs at the end of last year.

For part of this year, Bally had been in talks with Gold’s Gym International, Irving, TX. Officials from both companies met in early August in Chicago. According to a source, among the topics that were discussed were Bally’s club operations, facilities, real estate and finances. Gold’s was to visit about 40 Bally clubs, according to a source. But talks of a possible Gold's acquisition of Bally cooled later.

The LA Fitness acquisition of Bally marks the second big deal in the industry in the past four days. On Tuesday, Life Time Fitness, Chanhassen, MN, announced it had acquired four clubs operated by Lifestyle Family Fitness, St. Petersburg, FL, in Ohio and Indiana and that it could acquire up to another five in North Carolina. Lifestyle also announced it would close at least nine of its clubs in those states, pending the terms of the deal, which will be finalized early next month.

In August, Equinox, New York, announced it was purchasing four The Sports Club/LA clubs from The Sports Club Co., Los Angeles. That deal went for $130 million, according to a source, and was finalized in October.

LA Fitness is ranked No. 2 behind 24 Hour Fitness, San Ramon, CA, on Club Industry’s Top 100 Clubs list this year. LA Fitness had an estimated $1 billion in 2010 revenue. (24 Hour had an estimated $1.352 billion.) Bally is No. 5 on this year’s list, as it reported $550 million in 2010 revenue.

In April, sources said that LA Fitness was close to a deal to acquire Urban Active, Lexington, KY, but the deal fell through at the last minute as Urban Active was met with lawsuits and handled complaints from the Better Business Bureau in the state of Ohio.

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Bally had been a public company and produced annual revenues north of $1 billion until 2007, when it filed for bankruptcy. In 2009, after Bally’s second bankruptcy in 17 months, JP Morgan received 50.5 percent of Bally’s equity, and Anchorage Advisors received 33.7 percent in a reorganization plan approved in bankruptcy court.

Bally’s roots go back 80 years to a company called Lion Manufacturing, which later became Bally Manufacturing. The company grew in the entertainment industry for the next 50 years. In 1983, Bally Manufacturing purchased Health and Tennis Corp. of America, creating Bally Health and Tennis Corp., a subsidiary of Bally Entertainment.

In 1995, the Bally Total Fitness name was developed after Bally Health and Tennis Corp. consolidated all of its various clubs under one name. Industry icons Jack LaLanne and Vic Tanny had owned Bally clubs at various times. In 1996, Bally Total Fitness Holding Corp. emerged from Bally Health and Tennis Corp., a move that completely separated the health and fitness arm of the Bally operation from the Bally gaming and entertainment arm. At one point in the 1990s, Bally operated almost 400 clubs in the United States and Canada.

Since it was founded in 1984, LA Fitness has remained an intensely private company, one that is reluctant to share information publicly. LA Fitness takes on the persona of its founder, Chin Yi, a Korean-born immigrant who came to the United States when he was a boy. In the past two years, however, LA Fitness has released more information about several of its club openings.

In addition to its executive management team, LA Fitness is owned by three main investment companies: Seidler Equity Partners, Marina del Ray, CA; CIVC Partners, Chicago; and Madison Dearborn Partners, Chicago. Seidler Partners has been with LA Fitness since 1998, and CIVC Partners joined the company in the early 2000s. In 2007, Madison Dearborn acquired a 20 percent stake in LA Fitness for a reported $600 million.

The strategy of LA Fitness has been to acquire and operate underperforming clubs. That strategy helped the company flourish in the 1990s. In 1995, LA Fitness designed and built a 45,000-square-foot club that has become the signature model for the company. Typically, LA Fitness clubs range from 20,000 to 60,000 square feet.