Private equity firms Leonard Green & Partners and TPG Capital announced on Monday, March 16th that they were teaming up to purchase Life Time Fitness for close to $4 billion, including debt, in a move that w2ill see the gym operator taken private.
The LBO deal works out to $72.10 a share in cash, a 7.3% premium to Life Time Fitness’s closing price on Friday, and a 73% premium to the firm’s share price on Aug. 22, when Life Time Fitness management announced it had begun exploring corporate financing options.
Of note, the firm currently operates 114 fitness centers in the U.S. and Canada.
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Assuming approval from Life Time shareholders, the deal is anticipated to close by September 30th of this year.
Statement from Life Time Fitness CEO
“There are no words to describe my gratitude for the confidence and significant commitment Leonard Green & Partners, TPG and LNK Partners have made to Life Time and our management team,” Life TIme Fitness CEO Bahram Akradi commented in a statement.
More on the PE buyout of Life Time Fitness
the founder and CEO of Life Time Fitness, Bahram Akradi will retain his role and a significant ownership position in the firm as he will roll over more than $125 million worth of the stock he already owns. The $72 a share buyout price values his stake at close to $180 million.
PE firm LNK Partners (who is also invested in budget health-club owner Fitness Connection and fitness program creator Beachbody LLC) is also taking a share of the action in the deal.
Marcato Capital Management , the largest shareholder in Life Time Fitness, pressured the management of the gym operator to make changes, and at that time the company said it was looking at assigning its properties into a real-estate investment trust, a popular move among service firms today to reduce their tax bills.
Of note, the share price of the company has been boosted by a recent Wall Street Journal report that Life Time was in talks with private-equity firms.
The company’s statement noted the buyout agreement followed a “comprehensive review” of strategic alternatives.
Analysts at Stifel Nicholas note:
The offer price fairly values the business, in our view, at ~20x CY16E EPS, is comprised completely of cash, and, perhaps most
importantly, involves LTM’s current CEO and Board Chairman staying on board. Although Mr. Akradi has been viewed as a polarizing figure in the investor community, his influence in making LTM what it has become today is indisputable, in our view. Given the growth opportunities that lie ahead, we believe it is highly valuable to keep Mr. Akradi around as a means to leverage his new center planning and analysis acumen and his extensive sports and health club operational expertise
Given we see the potential for a competitive bid as highly unlikely and view the proposed offer as fairly valued, we would encourage investors to lock in gains today on the post-privatization announcement run up and look to deploy their capital elsewhere.