The Gym Store LLC, a group led by majority investor Jeff Partrick, entered the highest bid for the assets of the remaining Busy Body stores of Fitness Holdings International at a court auction on Aug. 11.
Held in the U.S. District Court, Central District of California, the court auction was the culmination of the Ch. 11 bankruptcy reorganization filed in October 2008 by Fitness Holdings International (FHI), which owned and operated Busy Body Home Fitness and Omni Fitness. Click here to read an Oct. 21, 2008, SNEWS® story, "Omni/Busy Body Home parent FHI files Ch. 11 reorganization for entire group, plans sale of stores."
Down from its peak of 114 stores, FHI has 20 stores remaining in California and one in Alaska. The winning bid for the business assets, not including store leases, was $550,000, with three bidders participating in the court auction that lasted about 30 minutes.
Partrick, CEO of Hoist Fitness, won the auction when the last bidder, Brandon Sugimoto, FHI's director of financial analysis, bowed out at $545,000. SNEWS sources said Sugimoto sat in the court hearing with FHI President/COO Kenton Van Harten and Busy Body retail manager Blair Gannam. Sugimoto had entered an opening bid proposal of $200,000 with the court on July 29, 2009. Click here to see a July 31, 2009, SNEWS story, "FHI employee is proposed buyer for Busy Body assets: $200,000 offer, with bidding open."
The third bidder was a group operating under the name "Green Giraffe" whose group bowed out at about $515,000.
Southern California operating asap
Partrick told SNEWS he and his management group plan to operate eight to 10 retail stores in Southern California from Los Angeles down to San Diego, maintaining the Busy Body Home Fitness name. He stressed the operation is a completely separate and independent company from Hoist Fitness. The deal should be done and paperwork signed to finalize the purchase by Aug. 14, he said, and stores will open "virtually immediately" under their management.
"We're still making arrangements," he said, noting how quickly the deal came together in the last few weeks. "Obviously, I've been aware of the situation, but until recently, it looked as if the current owners were going to put something together."
Since the leases were not part of the purchase, Partrick said negotiations are on the fast-track.
"We're still in the process of negotiations with some of the landlords," he said. "We're hoping to execute leases on the exact same stores" as Busy Body's current locations.
Dave Silva, a former Busy Body district manager who opened OC Gym Equipment in Newport Beach in November 2008, will merge his store into the new company and, per Partrick, will be director of store operations for the retail venture. Yossi Shimony, CEO of Pronto Installation, will take on logistics and warehousing.
"This company, meaning the company we just purchased, has a lot of great employees and a lot of great staff, and they just need the resources," Partrick said. "In the last year with the bankruptcy, they've been handcuffed. Once we take off the handcuffs and release the resources, we're going to have a great company here again."
He said they will begin interviewing the former and current FHI/Busy Body staff. At this time, he named Hoist, Octane and PaceMaster as signed suppliers with Life Fitness being likely.
Ironically, FHI had acquired in November 2003 a chain of nine Fitness Warehouse stores in Southern California, owned by Partrick and the other Hoist owners. Click here to see that Nov. 10, 2003, SNEWS story, "Busy Body snaps up Fitness Warehouse, grows to 48." That was the third of nine acquisitions for the company between 2002 and 2005 after FHI bought stores in a court auction after the former Busy Body's bankruptcy in 2001.
And Northern California?
Of the 20 stores remaining in California as of Aug. 12, 2009, eight of those are in Northern California. SNEWS learned that Scott Egbert, owner of Chicago Home Fitness, Utah Home Fitness and other "home fitness" operations, will be taking over those assets from Partrick.
"Jeff bought the assets, and I'm purchasing the Northern California assets from Jeff," Egbert told SNEWS as he was boarding a plane on Aug. 12 for Northern California from Southern California where he sat in on the auction.
He is in the process of talking to landlords and visiting stores this week, he said. Other details were not yet available as to his plans.
Meanwhile, the suit filed May 21, 2009, by the unsecured creditors committee against FHI that charged breach of duties and fraud is still moving ahead. (Click here to read a May 22, 2009, SNEWS story on that case.) Defendants Kenton Van Harten and lender Pacific Western Bank have filed briefs asking the court to dismiss the case. In addition, the court approved on Aug. 10 a payment of $555,000 to its bankruptcy financial advisor Kibel Green.
As negotiations go into high-speed in different parts of the country to finalize store sales and openings, Partrick expressed confidence about the retail operation quickly getting up to speed.
"At the end of the day, our goal is to have all the stores by Oct. 1 freshened up and stocked with our go-forward vendors," he said. "I think we're going to be successful."
SNEWS® View: It seems it was clear to vendors that leaving the populous Golden State without a solid retail operation run by those they know wasn't an option. We don't doubt the conversations started quickly and moved at light speed -- at the Health & Fitness Business Expo last week, we saw a number of the various players in the deal pow-wowing. The transition will likely be nearly seamless with the deal to be sealed by Aug. 14, and most of the operations probably never closing. That means it will be seamless to consumers, too, which is the best scenario since closures would mean yet more egg on the face of the fitness industry if any customers end up paying for but not getting equipment. Knowing the ambiance, professionalism and décor of the former Fitness Warehouse stores, we suspect these new operations could actually bring new levels of trust to the consumer and will lay the groundwork for growing sales as the economy seems to be hinting at a turnaround. That all seems like good news.