LA Fitness and 24 Hour Fitness Agree to Club Exchange

LA Fitness and 24 Hour Fitness Agree to Club Exchange.
LA Fitness intends to acquire the assets of the eleven 24 Hour Fitness clubs in Arizona, and 24 Hour Fitness intends to acquire the assets of two LA Fitness clubs in Oklahoma and one in Nebraska, the companies announced on Monday.

The exchange means that 24 Hour Fitness, San Ramon, California, no longer will have clubs in Arizona. LA Fitness, Irvine, California, already had 37 clubs in Arizona, including eight in the Phoenix area where the 24 Hour clubs are.

“Like every business, we are constantly looking at our portfolio to determine the best locations for us to be in,” Frank Napolitano, president of 24 Hour Fitness, told Club Industry. “Among the cities that we looked at when we acquired 24 Hour Fitness 18 months ago was Phoenix. Our assessment of the city was that it was not a core market for us. At that time, we discussed the possibility of selling that market to a number of players. Ultimately, the only transaction that made sense to us was with LA Fitness.”

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Napolitano said that Phoenix was not a market where 24 Hour ever “gained the kind of cluster that we ought to see.”

He would not discuss how the deal transpired with LA Fitness, and he made a point to call the transaction an acquisition rather than a purchase.

“I wouldn’t want to suggest any of the terms of the transaction. They’ve got some and we’ve got some,” he said.

With the exchange, LA Fitness is exiting the Nebraska and Oklahoma markets, as it has no clubs in either state beyond the three involved in the exchange.

24 Hour Fitness already has four clubs in the Omaha area, where the LA Fitness club it is acquiring is located, but the acquisition of the two Oklahoma City clubs will move 24 Hour Fitness into that state.

Napolitano noted that 24 Hour Fitness already has a strong presence in the Kansas City, Missouri, market, so the company was excited to add Oklahoma City to its Omaha and Kansas City locations.

“We believe the Midwest offers interesting possibilities for us to make those cities core markets for 24 Hour Fitness,” Napolitano said. He would not comment on other Midwest markets that 24 Hour Fitness might be eyeing.

The announcement did not share any financial details about the transaction, and Napolitano declined to discuss specifics about the agreement. The announcement did not share whether the acquisitions would lead to the closure of any of the clubs in Phoenix, but Napolitano said that 24 Hour Fitness had “no intention of closing any clubs as part of this transaction.”

LA Fitness had not yet returned an email requesting comment on the acquisition.

LA Fitness ranked No. 1 on Club Industry’s Top 100 Clubs list of 2015 with an estimated revenue of $1.85 billion in 2014. 24 Hour Fitness ranked No. 2 on the list with 2014 revenue of $1.33 billion, according to sources.

LA Fitness will honor the active member agreements it acquires, and 24 Hour Fitness will honor the active member agreements that it acquires. This includes agreements for personal training services and other amenities.

The announcement states that the companies hope to close the transaction on Nov. 20, 2015, and, prior to that, they hope to meet with all interested employees about employment opportunities.