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Alaskan Gym Market Sees Buyout Deal

Target: The Alaska Club

Price: Undisclosed

Sponsor: Lincolnshire Management

Seller: The Alaska Club

Financial Adviser: Seller: The Mercanti Group

Lincolnshire Management cast its net wide to snare its latest deal, a string of fitness centers that spans the state of Alaska.

The New York-based buyout firm last month closed its acquisition of The Alaska Club, paying an undisclosed sum for 17 gyms. Ares Capital Corp. led the debt financing, arranging a $72 million senior credit facility consisting of a revolver and term loans.

Kate Lehman, a principal with Lincolnshire, said the firm had been looking for a deal in Alaska, believing the state’s relative isolation and growing population would provide both a natural barrier to entry and a source of organic growth for any deal. This particular company proved appealing, she said, because the fitness industry is generally performing well among retailers. North Castle Partners, for instance, sold the Equinox gym chain in 2005 for $505 million after paying a little more than $100 million five years before. On the other hand, Bally Total Fitness Holding Corp. only recently emerged from Chapter 11 bankruptcy protection. It wound up there by taking on too much debt, and not signing up enough new members amid withering competition.

The Alaska Club’s facilities range in size from 5,000 square feet to 17,000 square feet, and the larger gyms have basketball courts, indoor pools and other amenities that cater to entire families, especially during the long, cold winters. “It’s Alaska, so you can’t do much outside,” Lehman said. To spur growth, the Alaska Club will likely expand some of its smaller gyms to include more of these indoor activities, she added.

The transaction came to Lincolnshire from sell-side adviser The Mercanti Group, which pitched the company to one of Lincolnshire’s legion of deal sourcers. The one complication for the buyer was that The Alaska Club counted more than 200 individuals as owners, making it difficult to keep the deal confidential as it unfolded, Lehman said.—J.H.