Bally Fails in 2nd Attempt to Sell Health Club Chain
A second attempt by Bally Manufacturing Corp. to sell its chain of health clubs has fallen through, blocking company plans to focus on its casino, gambling equipment and coin-operated machine ventures.
Chicago-based Bally confirmed Wednesday that talks to sell its Health & Tennis Corp. chain to an investor group led by Citicorp Capital Investors Ltd., a unit of Citicorp, had broken off.
Bally’s stock was off 75 cents at $13.75 on the New York Stock Exchange.
On Oct. 16, Citicorp had signed a letter of intent to acquire the chain in a leveraged buyout valued at more than $500 million, including the assumption of about $200 million in debt.
Bally, which operates casino-hotels in Las Vegas and Atlantic City, has been restructuring to reduce debt swollen by recent gaming acquisitions. It sold its Six Flags theme park chain in May for $610 million.
Offering Withdrawn
Health & Tennis, which operates clubs under such names as Tanney, Holiday Health and Chicago Health Clubs, is the nation’s largest health club chain.
Bally decided to sell the chain after it withdrew a planned public offering of a 24% stake in Health & Tennis last June, citing bad market conditions.
Bally spokesman William Peltier blamed the collapse of the sale to the Citicorp group on “external pressures brought on by Black Monday,” a reference to the Oct. 19 stock market debacle.
Peltier said he believed that the Citicorp group had planned to fund part of the purchase through the sale of high-risk “junk bonds” and noted that the market for them has been nervous since Oct. 19.
Peltier said a total of six companies or investment groups had expressed serious interest in Health & Tennis when the unit was placed on the block last fall, but he declined to name the suitors.
Industry analysts were unsure whether Bally would find a buyer now for the same price. “They’ve been trying to sell that for a long time,” said Merrill Lynch analyst Harold Vogel. “Obviously, if there were financing available and the price were right, it would be sold.”
Price Considered High
Vogel said it was hard to place a value on the unit, but said he thought that the $500-million proposed sale price was “a little high.”
Steve Eisenberg, an analyst with Bear, Stearns & Co., said he was more optimistic.
“I think the marketplace changed, rather than Health and Tennis Corp. not being saleable,” Eisenberg said.
