Bally Total Fitness Holding Corp., Chicago, announced today that it has entered into an agreement with Blast Fitness Acquisition LLC, an affiliate of Blast Fitness Group LLC, Auburndale, MA, in which Bally will sell 39 clubs to Blast Fitness.
Bally spokesperson Larry Larsen declined to disclose the terms of the deal, which includes a cash consideration and an assumption of certain liabilities by Blast. The deal is expected to be completed by May 1.
Blast, a club chain that offers memberships as low as $10 a month, will acquire Bally clubs in Boston (three); Buffalo, NY (one); Charlotte, NC (two); Fresno, CA (five); Milwaukee (four); Providence, RI (one); and St. Louis (two), plus three in Connecticut and all 18 in Texas, consisting of nine in Houston, five in Dallas-Fort Worth and four in San Antonio.
The deal comes five months after the LA Fitness acquisition of 171 Bally clubs last November. Once the Blast deal is finalized, Bally will have about 60 clubs remaining, Larsen says.
Blast currently has 15 clubs open in Illinois, Massachusetts, Minnesota and Rhode Island, plus four more clubs in Illinois that are expected to open soon, according to its website. Ten of the clubs, including all six Massachusetts clubs, the one Rhode Island club and three of the four Minnesota clubs, direct prospects to a page with a Work Out World logo.
The CEO of Blast Fitness is Steve Borghi, who has encountered numerous problems in the past involving Work Out World clubs. (A separate chain of Work Out World clubs is based in Brick, NJ.) In August 2009, Borghi received a suspended 30-day jail sentence after pleading guilty to two misdemeanor violations of the New Hampshire Consumer Protection Act and pled guilty to two felony violations of the same statute on behalf of Downtown Fitness LLC, dba Work Out World, Laconia, NH, the Laconia Daily Sun reported at the time. The charges stemmed from a Work Out World club that had yet to open. The club was fined $15,000.
Then in December 2009, Borghi had difficulties with a Work Out World club that had yet to open in East Providence, RI. According to a report by TV station WPRI, Borghi did not register the club with the state of Rhode Island, nor did he get a permit to pre-sell memberships, even though he signed up close to 3,000 people. Borghi said at the time that he would refund the members.
“We’re not smoke and mirrors,” Borghi told the TV station. “We’re the real deal, and we bring in a real affordable price.”
Club Industry has yet to contact Borghi.
In addition to the $10-a-month option, Blast members can purchase a $19.99-a-month membership. Services offered by Blast include a women-only area, personal training, babysitting, group exercise classes and unlimited tanning.
Blast will honor all Bally memberships in the markets in which Blast acquired clubs. Transferred members will have membership privileges at the remaining Bally clubs in other markets.
“If you are a Bally nationwide member, and your home club is acquired by Blast, there will be reciprocity,” Larsen says. “If your local market is now all Blast Fitness but you travel to New York or San Francisco and you want to work out in a Bally, you will be able to do that, which will give a level of seamlessness to members.”
J. P. Morgan Securities LLC acted as the exclusive financial advisor to Bally on the Blast deal. Wachtell Lipton provided legal advice.
After the completion of the deal, Bally will have 23 clubs in the New York City area, six in the San Francisco area and seven in the Denver area. Houston was one of Bally’s other core markets prior to the Blast deal.
“We felt that our efforts would be better spent in other markets where we have a very big presence,” Larsen says.
Larsen declined to comment specifically on the future of Bally.
“We have a management that is committed to the business and doing what’s best for it,” Larsen says. “They’ll continue to review all the opportunities and make decisions accordingly.”