CHICAGO — Bally Total Fitness and its two largest shareholders agreed to dismiss all pending litigation after months of proxy battles and back-and-forth letters. Pardus Capital Management, which owns 14.4 percent of Bally's stock, waged a proxy contest to overhaul Bally's board of directors while Liberation Investments, which owns more than 12 percent of the shares, introduced a proposal at the Jan. 26 shareholder meeting to oust Paul Toback, Bally's CEO. The two funds sued Bally in the Delaware Chancery Court in December over a takeover defense plan in the shareholder rights proposal, which barred two investors from making deals to vote together.
Two weeks after the annual shareholder meeting, Bally also announced the election results. According to a Feb. 10 announcement, the three board candidates supported by both Pardus and Liberation — Don Kornstein, Charles Burdick and Barry Elson — were all elected to the board. Bally also announced that Kornstein and Elson will join the board's Strategic Alternatives Committee, which was established in January to work with the Blackstone Group and JP Morgan Securities to explore the strategic sale process of Bally.
Bally board members also unanimously voted to invite Eric Langshur, Bally's board candidate, to rejoin the board after Adam Metz stepped down. Liberation's proposal to oust Toback didn't receive the sufficient 75 percent of the shareholder vote to pass, and he will remain as the CEO of Bally. The shareholders also rejected Bally's equity compensation plan, which would have made 1.75 million additional shares available to Bally employees.