Busy Body owner Hancock Park buys remaining Omni stores from Brunswick

Building a specialty fitness group with bi-coastal reach, Busy Body Home Fitness owner Hancock Park Associates has acquired the Omni Fitness stores from Life Fitness-parent Brunswick.

Building a specialty fitness group with bi-coastal reach, Busy Body Home Fitness owner Hancock Park Associates has acquired the Omni Fitness stores from Life Fitness-parent Brunswick.

That brings its fitness retail holdings to 104 in 14 states in the northeast and the west -- far surpassing the number owned by any other company. Midwest-based chains 2nd Wind Fitness will grow to 40 stores in seven states by year's end, and The Fitness Experience is down to 36 stores in five states after struggling financially the first part of this year.

The deal was sealed as of November, and financial details were confidential.

"This allows us to focus on our core business, which has never been retailing," Life Fitness President Kevin Grodzki told SNEWS®. Brunswick acquired Omni in early 2001 when it was the largest retailer in the United States, but the company has not hidden the fact that the stores had not been performing recently as it thought they should.

"When we were considering strategic alternatives for our operation, the decision became fairly easy," Grodzki said. "This wasn't a Brunswick-mandated initiative."

Hancock Park, a private equity investment firm based in Los Angeles, also runs Busy Body Home Fitness in the western United States under the umbrella of its operating company Fitness Holdings International (FHI). By the end of this year, FHI will run 59 specialty stores with outlets in Washington (6), Nevada (3), Arizona (6), Colorado (12), Alaska (1), and California (31 spread from north to south with a new one scheduled to open later this month in Fremont, Calif.).

The purchase of the Omni stores in the northeast brings full circle its acquisition in October 2003 of the then 17 Life Fitness-owned Omni stores in the west. That was the first of five acquisitions by FHI in the last year that has tripled the size of California-based Busy Body. Gone in those deals are retail divisions of Fitness Warehouse (November 2003), All About Fitness (May 2004), Exercise Equipment of Nevada (June 2004), and Advanced Exercise Equipment (August 2004).

"It's not a secret that Life Fitness/Brunswick has wanted to get out of retail, and we like specialty retail and we think we're good at it," said Kenton Van Harten, who is a partner in Hancock Park, president and COO of FHI, and now president and CEO of Omni Fitness. Brian McDermott, also a Hancock Park partner, is chairman of FHI and now Omni.

Van Harten called the acquisition "just in time for the busy season."

Although both Omni in the east and Busy Body in the west are now owned by one firm, Van Harten said the two will be operated as separate companies. Bob Prosser will take over running Omni Fitness as vice president of operations. Chris Clawson, an employee of Life Fitness who took over Omni's oversight last year as that company's managing director, and Mike Dolski, who ran Omni operations for Life Fitness, will oversee the transition. Calling both employees "valuable," Grodzki declined to say if or where the two might continue with Brunswick.

"We've always said Busy Body was staying in the west, and it is," Van Harten told SNEWS®. "It's separate people, separate regions" and different brands.

FHI acquired 16 stores of the former Carrollton, Texas-based, Busy Body chain when it went bankrupt in 2001 with 83 stores, owing the cumulative fitness industry about $17.8 million. The company then added seven and closed two, for a total of 21, before it went on its acquisition streak. That bankruptcy proceeding in the U.S. Bankruptcy Court, Southern District of Texas, was terminated in April 2004.

Not its first foray into fitness holdings, Hancock Park has a diverse portfolio that includes precision machining and aerospace, infant and toddler specialty retail, Saleen (a manufacturer of premium vehicles), a design and manufacturing company of moderately priced upholstered furniture, and party and special events shop Classic Party Rentals. Hancock Park was founded in 1986 and focuses on investing in small to mid-size companies that, according to its website (www.hpcap.com), "are typically below the sight-line of larger financial investors." In addition, the website states it focuses on a range of industries, but gravitates toward manufacturing and specialty retailing.

The website adds that "HPA's objective is to invest in fundamentally sound companies, add value through direct management or strategic input and realize long-term gains in equity values resulting from the improved operating results. In general, HPA invests $5 to $10 million in companies with revenues between $50 and $100 million at the time of acquisition."

With the sale sealed just in time to ramp up for the holiday and first quarter busy months, Van Harten said the focus will be getting through the period successfully before considering store additions or closures, other acquisitions, possible name changes or brand realignments. Currently, products from the Life Fitness family of brands is about 40 percent to 60 percent of the chain's mix.

"It would be foolish to look at new stores with the season upon us," Van Harten said.

He also said the company didn't go looking for this deal either, but he didn't preclude the possibility of additional growth on either coast.

"I would be lying," he added, "to say we're not looking at other opportunities."

SNEWS® View: Other opportunities, eh? Hancock Park has wisely grown companies it has invested in, including previous Busy Body stores. Not to say that the industry doesn't seem a hair bit nervous to see this kind of growth since history has shown several strong chains that have exploded and spread, only to implode and shrink, leaving everybody licking their wounds. Think of course of the biggest of them all, the former Busy Body with its 2001 liquidation that burned the industry for nearly $18 million. This incarnation of Busy Body, again under the tutelage of Hancock Park, seems to be different in that its intent is not to be a national chain, and Hancock's acquisition of Omni will be a separately run business. That means of course one isn't beholden to the other and can't bring down the other. Smart growth as seemingly undertaken by Hancock also means we expect nothing more to happen in the world of acquisitions until the spring of 2005. But we know Van Harten will be adding up air miles and burning up the phone lines talking to various others about those aforementioned "opportunities" that we all know will happen next year. Where will FHI look next? Utah is one gap in its coverage (see SNEWS® story, Oct. 22, 2004, "Utah specialty fitness market sees changes, expects growth"), as is Oregon, but something has to present the correct location and correct mix of brands. Growth in the East? Possible, but with census and state numbers showing most of the country's strongest population growth in western states such as Utah, Nevada and Arizona, we'd bet FHI will focus on those areas first.


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