❗Let's close the gap: We still need your help to raise $40,000 by April 1. Donate now

Trying to get Bally in shape

Ashley Milne-Tyte Aug 30, 2006

TEXT OF STORY

BRIAN WATT: Bally Total Fitness is working out behind closed doors. Two private investment groups have entered into so-called confidentiality agreements with the health club chain. They both have big stakes in the company. The moves are likely part of an effort to get Bally in shape for a reorganization or a run to the auction block. As Ashley Milne-Tyte reports, shareholders haven’t been happy with Bally’s performance of late.


ASHLEY MILNE-TYTE: Bally had its heyday in the ’80s and early ’90s. Then competition began crowding the fitness industry, and Bally couldn’t keep up.

Industry consultant Michael Scott Scudder says Bally’s membership is about half of what it was 10 years ago. And its net revenues amount to zero because it’s in so much debt.

MICHAEL SCOTT SCUDDER: “They had high sales costs, high executive costs. They leveraged the company highly meaning they took on more and more debt anticipating that they would continue to grow sales commensurate with that debt, and they didn’t.”

Shareholders, including Liberation Investment Group and Pardus Capital Management are tired of the extra weight.

Last year the two investment groups led an unsuccessful effort to remove Bally’s management team.

This time, Scudder says, there’s speculation they’re trying to head off a bankruptcy by taking the company private.

I’m Ashley Milne-Tyte for Marketplace.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.