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The Sports Club Co. Proposes Selling Six Clubs and Going Private

The four principal stockholders of the Sports Club Co. Inc. have proposed returning the company to a private company and selling off six clubs to help retire the company's outstanding senior secured indebtedness.

Under the proposal, the company's public shareholders will receive $2.00 for each share of common stock owned by them through the merger of a newly formed entity (to be owned by the company's four principal stockholders—Millennium Partners, Rex A. Licklider, D. Michael Talla, Kayne Anderson Capital Advisors L.P., and their affiliates) with and into the company with the company being the surviving entity.

The letter of intent further contemplates that the company will sell six of its nine sports and fitness complexes to an affiliate of Millennium for $65 million. The clubs to be sold include the company's three facilities located in New York City, and single clubs in Boston, Washington, D.C., and San Francisco. In addition, the management agreement for the club in Miami, FL, will be assigned to Millennium. Following the sale, the company will continue to own and operate its three Southern California clubs: The Sports Club/LA - Los Angeles, The Sports Club/LA - Beverly Hills and The Sports Club/LA - Orange County.

As part of the proposed transaction, the company intends to arrange for new financing secured by its property in West Los Angeles and use a portion of the remaining proceeds of the asset sale and new financing to retire the company's outstanding $100 million of senior secured notes due in March 2006. Rex Licklider, chief executive officer of the company, stated, "The sale of the assets to Millennium and the refinancing of the West Los Angeles property will strengthen our balance sheet and relieve the company of the significant debt burden under which we have operated for several years." Mr. Licklider concluded by saying, "The company and Millennium will work together to maintain the standard of excellence synonymous with The Sports Club/LA brand. We have established ourselves as the premier operator of luxury sports and fitness complexes in the world, and our members can be assured that The Sports Club/LA brand will continue to embody the highest levels of service and quality."

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