Health Club News…..Gold’s Gym in Talks to Buy Bally! Breaking news on the industry, people on the move, mergers and acquisitions and much more. Delivered weekly.

In what would be a blockbuster deal, Gold’s Gym International (GGI) is in discussions to acquire Bally Total Fitness, multiple sources tell Club Industry. The talks have been going on for about a month, and they are intensifying, according to sources. One source described the acquisition discussions as “hot and heavy and real.”
Bally CEO Michael Sheehan says he first heard rumors about the acquisition last week. “Our general approach is to not respond to rumors,” Sheehan told Club Industry. JP Morgan Chase Bank, the primary owner of Bally, Chicago, declined comment for this story. So, too, did a high-ranking official at GGI, Irving, TX.
The lack of public comments from Bally and Gold’s has not stopped speculation about an acquisition, when it would take place and what it would mean for the industry. One source says a deal could get done in the next month, around the time of GGI’s franchise convention July 18-20 in Las Vegas. Another industry observer says a deal might not be announced for another 60 to 90 days. If a deal materializes, the two companies would need to get landlord consents to close the transaction. GGI is owned by private equity firm TRT Holdings, whose assets include the Omni Hotel chain. TRT bought Gold’s from Brockway Moran and Partners in 2004 for $158 million. JP Morgan shares ownership of Bally with Anchorage Advisors LLC. 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 had been a public company prior to emerging from its first bankruptcy in 2007. Under its current ownership, GGI has not traditionally disclosed financial information about the company to Club Industry for the magazine’s annual Top 100 Clubs list. GGI did report this year that it had 700 clubs (63 corporate clubs and 637 clubs run by franchisees) at the end of 2010. Bally, after declining to submit financial information last year, reported $550 million in revenue for 2010, placing the company fifth on this year’s Top 100 Clubs list, which will be released next month. By comparison, Bally reported $1.059 billion in 2006 prior to its first bankruptcy. Sources have speculated about the asking price for Bally. One source says that if it sells for $1 million per club, then the total acquisition could be about $270 million. (Bally reported to Club Industry that it operated 278 clubs at the end of 2010.)“Where else can you buy 270 clubs for $270 million? You can’t,” the source says. But the source adds that a company buying Bally likely would have to invest an additional $100 million for upgrades and/or a possible re-brand. “Gold’s might get some religion when they figure out how much it’s actually going to cost,” the source says. If this deal goes through, there are other issues to consider, sources say. Would Gold’s keep the Bally brand or convert them all to Gold’s Gyms? And how would that sit with current Gold’s franchisees who might have to compete with other company-owned clubs in their territory?
“If they were to operate Bally as a separate entity, then maybe that allows them to run the two concepts, and where there’s overlap with the franchisee, they’d just keep the Bally name,” one source says. Another source says that if GGI were to acquire Bally, GGI would turn those clubs into corporate clubs, and the Bally brand would disappear. “As far as position in the marketplace, it certainly enhances GGI’s positioning immediately,” the source says. Officials at the Gold’s Gym Franchisee Association declined to comment about the speculation of a possible Gold’s acquisition. In addition to enhancing GGI’s position in the industry, the speculated acquisition also might result in “mass confusion and litigation,” as one source put it. Another source says the acquisition would set in motion an entire consolidation phase of clubs in the industry. Sheehan, who took over as Bally CEO in 2008 after serving as an executive at 24 Hour Fitness, San Ramon, CA, says he has heard rumors of a Bally sale in the past, even after joining Bally and not long after Bally re-emerged from bankruptcy. “In our industry, somebody’s buying and selling somebody probably every week,” Sheehan says. “This industry is certainly rife with rumors.” This time, the speculated Gold’s acquisition of Bally, according to sources, may be more than just a rumor.

Health Club News…..Gold’s Gym in Talks to Buy Bally! Breaking news on the industry, people on the move, mergers and acquisitions and much more. Delivered weekly.

In what would be a blockbuster deal, Gold’s Gym International (GGI) is in discussions to acquire Bally Total Fitness, multiple sources tell Club Industry. The talks have been going on for about a month, and they are intensifying, according to sources. One source described the acquisition discussions as “hot and heavy and real.”
Bally CEO Michael Sheehan says he first heard rumors about the acquisition last week. “Our general approach is to not respond to rumors,” Sheehan told Club Industry. JP Morgan Chase Bank, the primary owner of Bally, Chicago, declined comment for this story. So, too, did a high-ranking official at GGI, Irving, TX.
The lack of public comments from Bally and Gold’s has not stopped speculation about an acquisition, when it would take place and what it would mean for the industry. One source says a deal could get done in the next month, around the time of GGI’s franchise convention July 18-20 in Las Vegas. Another industry observer says a deal might not be announced for another 60 to 90 days. If a deal materializes, the two companies would need to get landlord consents to close the transaction. GGI is owned by private equity firm TRT Holdings, whose assets include the Omni Hotel chain. TRT bought Gold’s from Brockway Moran and Partners in 2004 for $158 million. JP Morgan shares ownership of Bally with Anchorage Advisors LLC. 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 had been a public company prior to emerging from its first bankruptcy in 2007. Under its current ownership, GGI has not traditionally disclosed financial information about the company to Club Industry for the magazine’s annual Top 100 Clubs list. GGI did report this year that it had 700 clubs (63 corporate clubs and 637 clubs run by franchisees) at the end of 2010. Bally, after declining to submit financial information last year, reported $550 million in revenue for 2010, placing the company fifth on this year’s Top 100 Clubs list, which will be released next month. By comparison, Bally reported $1.059 billion in 2006 prior to its first bankruptcy. Sources have speculated about the asking price for Bally. One source says that if it sells for $1 million per club, then the total acquisition could be about $270 million. (Bally reported to Club Industry that it operated 278 clubs at the end of 2010.)“Where else can you buy 270 clubs for $270 million? You can’t,” the source says. But the source adds that a company buying Bally likely would have to invest an additional $100 million for upgrades and/or a possible re-brand. “Gold’s might get some religion when they figure out how much it’s actually going to cost,” the source says. If this deal goes through, there are other issues to consider, sources say. Would Gold’s keep the Bally brand or convert them all to Gold’s Gyms? And how would that sit with current Gold’s franchisees who might have to compete with other company-owned clubs in their territory?
“If they were to operate Bally as a separate entity, then maybe that allows them to run the two concepts, and where there’s overlap with the franchisee, they’d just keep the Bally name,” one source says. Another source says that if GGI were to acquire Bally, GGI would turn those clubs into corporate clubs, and the Bally brand would disappear. “As far as position in the marketplace, it certainly enhances GGI’s positioning immediately,” the source says. Officials at the Gold’s Gym Franchisee Association declined to comment about the speculation of a possible Gold’s acquisition. In addition to enhancing GGI’s position in the industry, the speculated acquisition also might result in “mass confusion and litigation,” as one source put it. Another source says the acquisition would set in motion an entire consolidation phase of clubs in the industry. Sheehan, who took over as Bally CEO in 2008 after serving as an executive at 24 Hour Fitness, San Ramon, CA, says he has heard rumors of a Bally sale in the past, even after joining Bally and not long after Bally re-emerged from bankruptcy. “In our industry, somebody’s buying and selling somebody probably every week,” Sheehan says. “This industry is certainly rife with rumors.” This time, the speculated Gold’s acquisition of Bally, according to sources, may be more than just a rumor.

Tighter belts shape health club industry

The nearly $70-billion-dollar global health club industry is rolling with the punches of a tough economy while seizing the opportunities of globalization, a new report shows.Big health club chains tackled far-flung markets, and value clubs drew budget-minded consumers in 2009, according to the IHRSA (International Health, Racquet & Sportsclub Association) 2010 Global Report on the state of the health club industry.”Clubs doing well in Europe and the United States are either high end or budget clubs, because people want to cut back while still keeping gym memberships,” said IHRSA spokesperson Alison O’Kane. “It’s squeezing the middle market a lot.”In the United States health club chains made more money in 2009 but the number of clubs fell slightly. Club membership in Europe, led by the United Kingdom, Germany and the Netherlands, increased by four percent.”Europe and the United States are the most advanced markets, so the trends will start there,” O’Kane said. “There are more clubs open in Europe but America has more club members on average.”Over 128,000 health clubs served 119 million members around the world in 2009. And despite the weak economy, giant chains were keen to extend their global reach.The Curves franchise of women’s gyms is already in 76 countries and expects to enter Russia, China and India by the fall of 2010. O’Kane added that Gold’s Gym has several facilities in Egypt.And Anytime Fitness, a coed chain with 1300 gyms worldwide, has recently come to a franchise agreement with Japan, which had been among the most insular of markets.”Very few foreign brands have tried to enter the Japanese market,” said O’Kane. “And Japanese chains have stayed in Japan.”O’Kane said that while globalization has lessened the industry differences among countries, some remain.”There are a lot more community centers in Europe, where they’ll have a pool, soccer, workout equipment,” she said. “The big box model is unique to America.”She added that it is one-stop fitness, which is very big in Midwestern suburbs.”The whole family membership price is great, and there’s daycare. Huge clubs exist in Europe but the price point is way up there.”O’Kane said the 40-year-old global industry evolved from regional activities.”Every country has some sort of physical activity origin that the health club industry grew out of. It’s cultural thing,” she said.”The Japanese market developed through swimming pools. That was the center. Then they added a gym. The Netherlands’ health clubs developed out of martial arts, the U.S. clubs out of tennis and racquet ball.”She added that in Asia, the spa is very big and something that they’ve shared with the rest the world.So what’s on the horizon? O’Kane forsees a shift toward wellness.”The industry is trying to reposition itself as a solution to the global obesity problem,” she said. “Countries like Canada are leading in tax incentives for joining a health club. Switzerland and South Africa are also doing well.”O’Kane said it is happening in America, but much more slowly.”We need to find a way to leverage health promotion, working with governments, insurance companies, and doctors. Without branching out to these partnerships we’ll grow at a much smaller pace,” she explained.

Tighter belts shape health club industry

The nearly $70-billion-dollar global health club industry is rolling with the punches of a tough economy while seizing the opportunities of globalization, a new report shows.Big health club chains tackled far-flung markets, and value clubs drew budget-minded consumers in 2009, according to the IHRSA (International Health, Racquet & Sportsclub Association) 2010 Global Report on the state of the health club industry.”Clubs doing well in Europe and the United States are either high end or budget clubs, because people want to cut back while still keeping gym memberships,” said IHRSA spokesperson Alison O’Kane. “It’s squeezing the middle market a lot.”In the United States health club chains made more money in 2009 but the number of clubs fell slightly. Club membership in Europe, led by the United Kingdom, Germany and the Netherlands, increased by four percent.”Europe and the United States are the most advanced markets, so the trends will start there,” O’Kane said. “There are more clubs open in Europe but America has more club members on average.”Over 128,000 health clubs served 119 million members around the world in 2009. And despite the weak economy, giant chains were keen to extend their global reach.The Curves franchise of women’s gyms is already in 76 countries and expects to enter Russia, China and India by the fall of 2010. O’Kane added that Gold’s Gym has several facilities in Egypt.And Anytime Fitness, a coed chain with 1300 gyms worldwide, has recently come to a franchise agreement with Japan, which had been among the most insular of markets.”Very few foreign brands have tried to enter the Japanese market,” said O’Kane. “And Japanese chains have stayed in Japan.”O’Kane said that while globalization has lessened the industry differences among countries, some remain.”There are a lot more community centers in Europe, where they’ll have a pool, soccer, workout equipment,” she said. “The big box model is unique to America.”She added that it is one-stop fitness, which is very big in Midwestern suburbs.”The whole family membership price is great, and there’s daycare. Huge clubs exist in Europe but the price point is way up there.”O’Kane said the 40-year-old global industry evolved from regional activities.”Every country has some sort of physical activity origin that the health club industry grew out of. It’s cultural thing,” she said.”The Japanese market developed through swimming pools. That was the center. Then they added a gym. The Netherlands’ health clubs developed out of martial arts, the U.S. clubs out of tennis and racquet ball.”She added that in Asia, the spa is very big and something that they’ve shared with the rest the world.So what’s on the horizon? O’Kane forsees a shift toward wellness.”The industry is trying to reposition itself as a solution to the global obesity problem,” she said. “Countries like Canada are leading in tax incentives for joining a health club. Switzerland and South Africa are also doing well.”O’Kane said it is happening in America, but much more slowly.”We need to find a way to leverage health promotion, working with governments, insurance companies, and doctors. Without branching out to these partnerships we’ll grow at a much smaller pace,” she explained.