In a move to allow it to compete globally with other full-line equipment companies, Star Trac has entered into an agreement to buy the assets of long-time strength supplier Flex Fitness Inc.
The announcement was made quietly public at the Athletic Business show on Nov. 12 in Orlando, Fla., relying on word-of-mouth to spread since negotiations were barely completed. At the show, both Flex and Star Trac maintained separate booths, with one row between them that included Body Masters and Nautilus; staff simply shuttled back and forth between Star Trac's #512 and Flex's #924.
Star Trac President Steve Nero told SNEWSÂ® this is not a departure from his assertions in the past that the company didn't need a strength category and intended to focus on a complete cardiovascular line with "best-in-class" products in all categories. In fact, the company has entertained for months strategic partnerships with various strength companies that would allow joint distribution and benefit, but not necessarily ownership, he said. That all changed during his research.
"I realized a huge opportunity," Nero said about the move from looking at alliances to considering an acquisition. "We could take our successful processes to a strength company and transform it quicklyâ€¦. With very little investment, we'd be able to change the paradigm and transform the category.
"We can still be successful as a cardiovascular company," he added, "but I see an opportunity to be more successful and compete globally with the addition of a strength line."
The deal, which is expected to close Nov. 24, means the 28-year-old Flex brand name will remain on current product, but the company will become "Star Trac Strength," a wholly owned subsidiary of Star Trac. Financial details remained confidential.
"We have a little company with a big product, and that wasn't enough in today's industry," Flex Vice President Larry Brown told SNEWSÂ®, calling the company that did little or no marketing the "best kept secret."
Never known for its flash, Flex Equipment Inc. of Murietta, Calif., was founded by Mark Nalley nearly three decades ago and built its reputation on the equipment's solid biomechanical design. It was bought in March 2003 by John Lach, an investor in Chicago, Ill., who also owned real estate development company Paragon. At that time, SNEWSÂ® was told that the new owner, who renamed the company Flex Fitness Inc. (www.flexfitness.com), wanted to increase the company's marketing, broaden exposure, expand internationally, and add or update product lines. Although the goal was always to build up the company and merge it with another or sell it, Brown said it happened sooner than Lach had expected or intended.Â Brown said all of its 60 employees are expected to stay onboard.
Thanks to a push by Lach's ownership in the last 20 months, Flex did introduce its sleek Platinum line in October 2003, which was the first new product line for the company since it began, said Brown, who has been with Flex since 1980.
"We needed to move into the new century," Brown said. "Flex has always had this product that felt the way it's supposed to feel, but we lacked the finer engineering things to complete the package and make it more of a Mercedes Benz."
Flex will now tap into the engineering, product development and marketing areas that Irvine, Calif.-based, Star Trac already has well-developed.
"We have a great relationship," said Brown of the two Southern California companies who are 40 miles apart, "and now it's all part of the same family."
Star Trac's Nero said he foresees three years of product development ahead of it, with no new product likely until the 2005 Club Industry show, other than some tweaks in ergonomics and usability. At the IHRSA show in March 2005, the companies will be in one booth.
"We are committed to the Flex Platinum and Flex Classic lines," Nero said. Both lines will maintain the Flex name. Future product lines are expected to solely hold the name Star Trac Strength, he said, and will be designed to match the Star Trac product family.
"This is an entry point for us," Nero said. "It is not a destination."
The acquisition means the top six fitness equipment suppliers now have both cardiovascular and strength lines, with Star Trac being the last to climb aboard the full-line train. Most recently, Precor acquired FPI's Icarian brand in January 2004.
Since introducing its first DC-powered commercial treadmill (Star Trac 2000) in 1987 under the company name Unisen, Star Trac based its reputation for many years as being a treadmill company. The name of products slowly evolved into "Star Trac by Unisen," until the company dropped the use publicly of the Unisen company name and became exclusively Star Trac. With direct operations in the U.K. and Germany, its products now sell in more than 65 countries.
This acquisition is one more step for Star Trac under Nero's enthusiastic guidance as it climbs beyond its reputation as solid, if not conservative and a bit mousy. Not that Star Trac wasn't already breaking out of that mold prior to Nero's arrival in June 2003. In the 18 months pre-Nero, the company had entered a partnership with Johnny G's Mad Dogg Athletics Spinning program, redesigned its indoor cycling bikes, upsized its booths, and added more entertainment and pizzazz to its presentations, trade shows, collateral and photography. Since then, it has wasted no time to move even faster -- adding new features on treadmill, yet another indoor cycling bike, as well as two stationary cycles. The only category for the company still awaiting an update is its elliptical. Its show presentation too has been upgraded further, and its booths are now packed at shows. In addition, Star Trac in October bought its German distributor, MPK Cardio Fitness, four years after buying its U.K. distributor, Star Fitness, and only four months after moving a managing director from Europe to London.
"We are committed to being best-in-class in terms of cardiovascular equipment categories," he added, "and we're going to be world-class in strength."
SNEWSÂ® View: We asked Nero about his comment to us exactly a year ago stating, "We don't want to be all things to all people. We don't need to be the strength companyâ€¦. We want to stick with our core competencyâ€¦." He maintained that, no, the company doesn't want to be all things and still won't go for "best" in each strength category, but simply world class in general to complement its cardio line that still aims for a best-in-class product in each category. But that doesn't mean, it seems, that good business decisions don't tug at your shirt sleeve and cause a brow to furrow as someone rethinks strategy. Why would a company like Star Trac just forge an alliance with a strength company when it could perhaps own it for basically the same investment and, as a result, be able to reap all the profits and all the rewards? That's obviously what the other five companies -- Life Fitness, Technogym, Precor, Cybex and Nautilus -- figured out in the last few years. In fact, once Precor jumped on the train nearly a year ago, the whole model apparently changed as it suddenly became a requirement, not just a desire, to have it all under one roof for your customers.
As cardiovascular equipment progressed, commercial strength equipment seems to have stagnated a bit. OK, companies added curves, colors and sleek lines. But a free weight is still a free weight (well, maybe you have some grip holes in some plates) and a weight stack is still a weight stack, although Lamar Health, Fitness & Sport showed its new rocker switch for stacks at the Club Industry show. Nevertheless, we have begun to hear more and more people refer to strength equipment as a commodity. Does any club really choose its strength brand, then go and match its cardiovascular line to it? Nope. In fact, a supplier's customers will nine times (or more) out of 10 choose its favorite cardiovascular equipment then kinda pick whatever strength equipment it can get or is offered by the company for a good price. A few companies such as Hoist and Paramount have even quietly exited the commercial strength market despite solid lines. Why? The market was too spread, too thin, too commoditized. Nevertheless, there are dozens of strength companies that all seem to offer nearly the same thing, all basically good, all likely doing annual sales of $5 million or less and just hanging on, barely eking a slice of profits (or not) -- perhaps even waiting at their doorsteps for Prince Charming to show up like he did for Icarian and now for Flex.
This move will further change the face of the industry and lay the groundwork for a shaking-out in the next few years among strength manufacturers. Who will survive? Maybe whoever manages to merge with another company or, instead, simply morphs into a boutique brand with specialty product that offers something truly different or innovative. Star Trac has made the correct move, nabbing a solid company that is nearby with a good name and well-working machine shop it can transform into its own, all the while reaping additional profits and harvesting more market share, both domestically and around the world.