Sometimes the only place to go when you've reached the top is down. That could be the case for Bally Total Fitness Holdings Corp. (NYSE: BFT) as reports continue to swirl around the company and its stock-piling troubles.
Last week, financial news service The Daily Deal reported Bally was in talks to sell as much as 40 percent of the company in a broad move to divest assets, but cited only anonymous sources. The same story put the value of the sale at about $125 million or roughly $50 million less than the recently announced plans to raise $175 million through a five-year term loan facility to refinance existing debt.
A sale of the sizable minority stake and divestiture of assets may make sense in light of the ongoing financial woes facing Bally, which had seen stock prices dip while it faces a continuing investigation by the Securities and Exchange Commission into its accounting practices. The company also faces a class-action lawsuit on behalf of purchasers of common stock between Aug. 3, 1999, and April 28, 2004, saying they paid prices that were based on incorrect information. Liberation Investments General Manager Emanual Pearlman has been one of the most vocal stockholders; he owns about 9 percent of Bally common stock.
Further fueling speculation of a sale is pressure being exerted by investors for management overhauls and other measures in light of the company's performance. Pearlman filed papers with the SEC in December pointing out the need for the company to take the positions of chairman of the board and chief executive officer out of the hands of one person (see SNEWSÂ® story Dec. 13, "Fitness Financials").
But, if there is a sale pending, Bally isn't promoting it.
"It is our policy not to comment on speculation or rumor," Jon Harris, Bally spokesperson, told SNEWSÂ®. Harris added that the company is always looking to enhance shareholder value, but the company is concentrating internally to achieve this.
While no confirmation was given to The Deal, its sources said that among the suitors are Apollo Management LP and Texas Pacific Group Tennenbaum Capital Partners LLC, which it termed a "large Bally Bondholder." It also named Life Fitness parent, Brunswick Corp., as potentially ready to make a strategic acquisition play. Â
A follow-up call from SNEWSÂ® to Tennenbaum Partners was met with a quick reply and similar to Bally's "no comment" from Tennenbaum senior partner, Michael Tennenbaum.
In addition to the sale of the large percentage of the company, the Daily Deal story also said that Bally was also considering selling off some of its Canadian and American clubs including the strong Crunch brand, which it acquired in 2001.
Sources told SNEWSÂ® that while the entire story can't be confirmed, the Crunch sale has been on the table for some time.