24 Hour Fitness Health-Club Chain Is Said to Be on the Block

The health-club chain 24 Hour Fitness is for sale, people briefed on the matter said on Tuesday.
 
Forstmann Little, the private equity firm that owns 24 Hour Fitness, has hired Goldman Sachs to run the auction process, these people said. Goldman will soon begin soliciting interest from potential buyers, a group that includes other fitness chains and private-equity firms. 

24 Hour Fitness is expected to fetch about $2 billion in a sale, said these people, who requested anonymity because they were not authorized to discuss the deal publicly.

With about 425 locations, 24 Hour Fitness is the nation's largest privately owned chain of fitness centers. A representative of the company did not immediately respond to a request for comment.
 

Forstmann Little's eventual sale of 24 Hour Fitness was expected. Once one of the world's largest private equity funds, Forstmann Little began winding down its operations several years ago afte r ill-timed telecommunications investments. Theodore J. Forstmann, the billionaire financier who led the firm, died last November at the age of 71.
 
24 Hour Fitness is one of the two major investments remaining in Forstmann Little's portfolio. The other is IMG, the sports, fashion and media company. Forstmann Little is also expected to pursue a sale of IMG sometime next year.
 
The Forstmann Little fund formally expired on June 30, 2012, meaning that it was contractually required to sell its assets and return all money to its investors by then. But the firm's investors - called limited partners in private equity parlance - had allowed that deadline to lapse and granted the fund extra time to sell 24 Hour Fitness and IMG. 
 
After Mr. Fortsmann's death, Forstman Little named the hedge fund manager Julian H. Robertson as its chairman. He, along with Mark J. MacDougall, a lawyer at Akin, Gump, Strauss, Hauer & Feld, have been overseein g the sale of the firm's remaining assets.

 
Health-club chains have been attractive acquisition targets for private equity firms because their membership fees generate predictable cash flows that they can use to pay off the debt taken on to pay for the company. The New York-based chain Equinox, for example, was owned by North Castle Partners and J.W. Childs before it was sold to the real estate developer Related Companies.
 
Other potential buyers of 24 Hour Fitness include LA Fitness, a chain of health clubs partially owned by the private equity firm Madison Dearborn; and Lifetime Fitness, a publicly traded company.

Forstmann Little acquired 24 Hour Fitness in 2005 for $1.6 billion. The company's financial results suffered during the recession, but have since improved. In recent years the company has expanded internationally, opening several outposts in Asia.

San Ramon, Calif.-based 24 Hour Fitness was started in 1983 by Mark S. M astrov, a former natural-foods salesman, with a single club. Today, the company sponsors the U.S. Olympic team and at the London Games has several athletes on its “Team 24″ squad, including the beach volleyball star Kerri Walsh and water polo captain Tony Azevedo.