Private-equity firms Leonard Green & Partners and TPG Capital have agreed to buy Life Time Fitness in a transaction valued at more than $4 billion, one of the biggest buyouts of the year.
The investor group, which also includes LNK Partners and Life Time’s chief executive officer, Bahram Akradi, will pay $72.10 a share in cash for the Minnesota-based company, according to a prepared statement. The price reflects a 73 percent premium to the closing price on Aug. 22, before Life Time said it was considering its strategic options.
The deal caps almost seven months spent contemplating various scenarios. Life Time, which operates 114 fitness centers in the U.S. and Canada, said in August it would explore a conversion into a real estate investment trust after posting second-quarter profit that trailed analysts’ estimates and cutting its sales forecast. The company also adopted a shareholder-rights plan prohibiting anyone from owning more than 9.8 percent of its stock, after Marcato Capital Management amassed a more than 7 percent stake.
Marcato, run by Mick McGuire, urged Life Time to consider options for its real estate, including potentially using its properties as collateral to speed up existing expansion plans, a person with knowledge of the situation said in May. Marcato, formed in 2010 with startup capital from Blackstone Group after McGuire worked at Bill Ackman’s Pershing Square Capital Management, is Life Time’s biggest outside shareholder. It has an 8 percent stake, according to data compiled by Bloomberg News.
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The companies expect Monday’s transaction to be completed in the third quarter. The deal would be the year’s biggest leveraged buyout that takes a company private.
Fort Worth-based TPG is one of the biggest U.S. buyout firms, overseeing $67 billion in assets. The firm has previously partnered with Los Angeles-based Leonard Green to buy J. Crew Group, MEMC Electronic Materials, Petco Animal Supplies and Savers.
Life Time and other fitness-center operators are facing increasing competition from lower-cost gyms and studio-based exercise programs, such as CrossFit and SoulCycle. Life Time reported $114 million in net income for 2014, down from $121 million the previous year. The company said it expects to earn $120 million to $128 million this year.
Company spokesman Jason Thunstrom said the company anticipates ongoing growth. And Jonathan Coslet, chief investment officer at TPG, described Life Time as a “market leader with a long history of consistent performance and significant growth potential.”
This article includes material from the Star-Tribune in Minneapolis.