An investment partnership led by financier Marvin Davis has bought half of Sports Connection, a West Los Angeles-based health club chain with eight large, upscale gyms sprinkled across Southern California.
The transaction announced Thursday will give Sports Connection the money it needs to continue building new gyms while remaining a privately held firm, said founder and President D. Michael Talla. Five plush athletic complexes under construction across the state are costing the firm a total of about $100 million, he said. Eight or nine more $20-million health clubs are in various stages of planning.
“We can get that kind of money, but we can’t get it as easily as Marvin Davis’ company,” Talla said.
Sports Connection had previously rejected bids from “four or five Fortune 500 companies” because it wanted to retain its operating independence and avoid facing pressure to produce higher earnings every quarter.
“We didn’t just want to be bled to death for current earnings. . . . (The deal) is capital injection, and it’s also business connections. We’re obviously a very real estate-oriented company,” Talla said.
Davis’ real estate and investment partnership--Los Angeles-based Miller, Klutznick, Davis & Gray--will hold two seats on a new, four-member board of directors at Sports Connection, Talla said. But the company’s top management will remain intact.
Investing in Sports Connection “is an extension of” the partnership’s current ownership of Aspen Skiing Co., a resort, and Pebble Beach Co., Davis said. Pebble Beach Co. owns two hotels, three golf courses and 17-Mile Drive, a scenic toll road that winds through Del Monte Forest linking Monterey to Carmel-by-the-Sea.
The partnership has no plans for physical fitness clubs in Pebble Beach or Aspen, Colo., but does think Sports Connection should expand as much as economic conditions permit, Davis said.
Finding a wealthy partner or parent company greatly helps a health club chain obtain loans and leases, said Rudy Smith, president of Holiday Spa Health Clubs, which has 21 outlets across Southern California. Bally Manufacturing, a Chicago-based conglomerate with $1.6 billion a year in annual sales, bought Holiday 5 1/2 years ago.
“When they hear Bally is behind the organization and holds it, it makes it a lot easier to get good locations,” said Smith, who added that Holiday nonetheless pays for all of its own growth out of retained profits.
Sports Connection owns six 45,000-square-foot clubs bearing the Sports Connection name, all aimed at drawing young professionals. It also owns a slightly larger Sports Spectrum club catering to an upper-middle class clientele, and Sports Club/LA, a 100,000-square-foot behemoth designed for upper-income executives and professionals.
A similar Sports Club facility in Irvine will open in August, 1989, and include not only a gym, aerobics classrooms, swimming pool, running track and two restaurants but also a car wash, executive meeting rooms and a body salon offering massage, tanning, facials and waxing.