North Castle works on process for more time, capital with CR Fitness

North Castle Partners is running a secondaries process to extend its hold over CR Fitness, a franchisee of Crunch Fitness health clubs, two sources told Buyouts.

The deal is an example of the kind of GP-led secondaries deals that often proceed with little publicity in the mid-market but are driving volume. Despite pricing uncertainty and macro pressure from inflation and geopolitical turmoil, GP-led secondaries continues to remain busy as GPs seek ways to deliver liquidity to investors and keep hold of treasured assets.

North Castle is seeking to raise around $200 million to $225 million for the deal, which would move CR Fitness out of North Castle Partners VII and into a continuation fund, the three sources said. Six Point Partners is working as adviser on the transaction.

It’s not clear how far along the deal is at this point. A North Castle spokesperson did not respond to a request for comment.

North Castle acquired CR Fitness in 2019. The company has about 40 clubs across three states, according to North Castle’s website. North Castle focuses investments in consumer-driven product and services businesses that include beauty and personal care, consumer health, fitness, recreation and sports, home and leisure and nutrition.

The firm closed its seventh fund on $400 million in 2019. The firm is led by managing partners Chip Baird, who founded the firm, Jon Canarick and Alison Minter. Canarick and Minter were named managing partners in 2020.

CR Fitness is a relatively young asset for North Castle, which is another characteristic of single-asset deals today. Many times, GPs are not choosing to solve for an asset held in a fund that is running against its term deadline, but instead hitting capital constraints as the fund runs out of money for add-ons.

Instead of seeking additional capital from existing LPs, GPs are choosing the continuation fund route, which provides fresh capital from new investors, which range from secondaries buyers to “non-traditional” buyers like large LP organizations. Existing investors are given the option to reinvest in the company through the new structure, which usually includes its own set of terms and economics. Existing LPs often are given the chance to kick more money in along with their reinvestment, though whether that’s the case with CR Fitness is not clear.

Other large single-asset deals in the market include AEA Investors’ process for more time with Excelitas, and KKR’s large process to extend its hold over Internet Brands.