North Castle Finds Fitness Deal In Canada

North Castle Partners recently made its first investment in Canada, acquiring the assets of World Health Club, which operates fitness clubs in Calgary and Edmonton.

Were it made in the United States, such an investment might look highly risky. Not in oil-rich Western Canada, where the economy is booming and where North Castle is looking for other deals as well, said Doug Lehrman, a managing director who leads the firm’s investments in fitness and recreation. “We thought that the Calgary and Edmonton marketplace was and is an interesting marketplace,” Lehrman said.

Terms of the deal were not released, though the Greenwich, Conn.-based buyout shop typically spends $20 million to $30 million of equity for companies generating high single-digit millions to $25 million of EBITDA. York Street Capital Partners provided senior and mezzanine financing. Partnership Capital Growth, an advisory firm based in San Francisco, brokered the deal.

North Castle, which invests exclusively in businesses that benefit from healthy living and aging trends, has a three-pronged strategy to expand World Health Club, which runs 14 clubs with 40,000 members. The firm intends to invest in its existing clubs, build brand-new clubs, and acquire potential competitors.

It isn’t the first time the firm has invested in fitness clubs. In 2000 the firm teamed up with J.W. Childs Associates LP to acquire Equinox Fitness Clubs for a little more than $100 million. In 2006, the two firms sold Equinox to The Related Companies for $505 million in cash. Equinox had 11 locations when North Castle bought it in 2000 and 32 when it sold it.

North Castle is also an investor in Octane Fitness Holdings Inc., a designer and distributor of low-impact cardiovascular fitness equipment; Cascade Helmet Holdings, a company that makes athletic helmets; and Performance Inc., an independent bicycle dealer and direct marketer of bicycles and cycling accessories.

The firm made the deal out of its North Castle Partners 2007 fund, which it is currently raising. The target for the fund is $250 million, and it is expected to close later this year.—B.V.