Of the many reactions to last month’s industry-shaking announcement that LA Fitness would acquire 171 Bally Total Fitness clubs for the price of $153 million, perhaps the most unexpected response came from one of its competitors: 24 Hour Fitness.

When asked for a comment about the deal, which was scheduled to be completed on Nov. 30, Wendy Yellin, spokesperson for 24 Hour, indicated that it was an encouraging sign for the industry.

“24 Hour Fitness believes the news of this acquisition validates the importance of making fitness more available to more Americans, especially as our country faces an increasing number of health-related concerns,” Yellin said. “We look forward to achieving this mission alongside our industry peers.”

24 Hour Fitness, San Ramon, CA, and LA Fitness, Irvine, CA, have been neck-and-neck in terms of revenue generated over the past two years. 24 Hour has been No. 1 and LA Fitness No. 2 each of the last two years on Club Industry’s Top 100 Clubs list, with each company generating estimated annual revenues of $1.352 billion and $1 billion, respectively.

The recent LA Fitness-Bally deal likely will cause a shift in next year’s rankings. LA Fitness will have more than 500 clubs in operation by the end of this year. 24 Hour reported 420 clubs at the end of 2010.

“It’s an interesting play and obviously one that LA Fitness feels will really catapult them into the leadership position in the industry, as far as number of clubs [of their type] go,” says Michael Scott Scudder, managing partner of The Fitness Industry Group, Taos, NM.

The LA Fitness acquisition involves Bally clubs in 16 states plus the District of Columbia. At the time of the announcement, Bally had 271 clubs in operation. After completion of the transaction, Bally will continue to operate its remaining 100 clubs.

A spokesperson for Chicago-based Bally said at the time of the announcement that Bally was going to focus on clubs in its key markets, which include New York, San Francisco, Denver and Houston. The spokesperson also confirmed that Bally’s first BFit club, a lower-price, smaller-box model that the company introduced in October in Illinois, is included in the LA Fitness acquisition. It remains to be seen what the future holds for the BFit model.

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.

“It looks like they ‘cherry-picked’ in this deal,” Scudder says.

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The price of the deal comes to about $895,000 per club. Earlier this year, as speculation centered around the possibility that Gold’s Gym International, Irving, TX, might acquire Bally, one source told Club Industry that the price of that deal likely would be about $1 million per club.

“Where else can you buy 270 clubs for $270 million? You can’t,” the source said at the time.

By contrast, Equinox, New York, spent $130 million, according to a source, to buy four The Sports Club/LA clubs from the Sports Club Co., Los Angeles, earlier this year. That comes to $32.5 million per club.

Scudder says that aside from the purchase price of the clubs in the LA Fitness-Bally acquisition, another intriguing aspect of the deal is the potential number of Bally members that LA Fitness acquired.

“If we can believe that Bally clubs still have somewhere in the neighborhood of 5,000 members per club, LA Fitness just picked up close to a million members,” Scudder says.

Bally had been a public company and produced annual revenues north of $1 billion for most of the 2000s before it ran into serious financial difficulty. The company filed for bankruptcy in 2007 and emerged as a private company. At the time of the filing, the company listed assets of $397 million and debt of $761 million.

In 2008, the Securities and Exchange Commission (SEC) sued Bally on financial fraud charges. The SEC claimed that from 1997 to 2003, Bally fraudulently accounted for initiation fees, pre-paid dues and reactivation fees, and Bally fraudulently accounted for its membership acquisition costs, among other accounting improprieties. Bally reached a settlement with the SEC the day the lawsuit was announced.

In late 2008, Bally filed for bankruptcy again, this time closing 26 clubs as part of the reorganization. JP Morgan received 50.5 percent of Bally’s equity, and Anchorage Advisors received 33.7 percent in the reorganization plan approved in bankruptcy court. JP Morgan Securities LLC acted as the exclusive financial advisor in the LA Fitness transaction.

Bally made its return to the Top 100 Clubs list this year after not reporting revenue figures a year ago. Bally is No. 5 on the list with $550 million in reported 2010 revenue. It also reported it had 278 clubs in 29 states in 2010.

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.

Consolidation in the health club industry was a major talking point throughout the year. With deals such as LA Fitness-Bally and Life Time Fitness-Lifestyle Family Fitness taking place last month, consolidation is coming to fruition, and it may continue in 2012.

“There is no doubt that the landscape of the health club industry is changing, and this acquisition by LA Fitness, among others, reflects the drive to consolidation,” says Bryan O’Rourke, partner in consulting company Integerus, New Orleans. “In my view, several major brands are going to take significantly larger market share. It’s going to be an interesting few years ahead.”