Private equity group Leonard Green & Partners LP and TPG have decided to build their health leading to the acquisition of gym operator Life Time Fitness, Inc. (NYSE:LTM). The $4 billion worth of acquisition is private and is counted among the largest leveraged buyouts this year in the U.S. According to sources close to the matter, both the private equity firms have won the deal from other bidders such as KSL Capital Partners LLC.
Pressure from Marcato
Life Time Fitness, Inc. (NYSE:LTM) chairman and CEO Bahram Akradi will continue to hold his position in the company and will remain invested in it. The company came under pressure last summer after its biggest shareholder; Marcato Capital Management LP pushed it to convert into a real-estate investment trust, a move adopted by several companies to trim their tax outgo. However, the gym operator has said that the latest decision came after a “comprehensive review” of the strategic alternatives.
It is to be noted that the investor group including Akradi will pay $72.10 a share in cash. The agreed price is 73% higher than the closing price of the stock on August 22, 2014, when the company confirmed of pursuing strategic alternatives. It took nearly seven months for Life Time Fitness, Inc. (NYSE:LTM) to finalize its move. Marcato’s growing stake in the company had earlier forced it to adopt shareholder rights plan, prohibiting anyone from buying over 9.8% stake in the company.
Life Time Fitness, Inc. (NYSE:LTM) runs nearly 114 fitness centers in the U.S. and Canada and keeps most of them open 24 hours a day. The company also has its own line of nutritional products and supplements, while it manages over 75 cycling, running and triathlon events through a division. The company anticipates closing the transaction in the third quarter. Low-cost fitness gyms and studio-based exercise programs have emerged as fierce competitors to the company off late, which led to lower net income of $114 million in 2014. However, the deal has helped the stock surge by over 5% to $70.68.