Four firms have landed roles in connection with the sale of 24 Hour Fitness by Forstmann Little & Co., the New York-based buyout shop that has been liquidating its portfolio following the November 2011 death of cofounder and private equity pioneer Theodore “Ted” Forstmann.
Akin Gump Strauss Hauer & Feld—whose cofounder, Robert Strauss, a longtime Forstmann confidante, died earlier this year—has been advising on the gradual wind-down of Forstmann Little’s private equity empire. In December the firm took the lead on the buyout shop’s $2.3 billion sale of IMG Worldwide to entertainment industry rival William Morris Endeavor Entertainment, according to our previous reports.
While financial terms related to the sale of 24 Hour Fitness were not disclosed when the deal was announced late Friday, various news reports and a source familiar with the matter pegged the purchase price for the San Ramon, Calif.-based chain at roughly $1.85 billion. Forstmann Little first put 24 Hour Fitness on the block in 2012, but canceled an auction process last year after receiving what it considered subpar offers for the business.
Forstmann Little, which paid $1.6 billion to buy 24 Hour Fitness from company founder Mark Mastrov in one of its last big deals in 2005, shook up the company’s management ranks last year in an effort to improve operations. Amid the reshuffling, general counsel Elizabeth Blair was promoted to serve as its new CEO. In a press release touting the proposed sale of 24 Hour Fitness to an ownership group led by AEA Investors, Fitness Capital Partners and the Ontario Teachers’ Pension Plan, Akin Gump litigation partner Mark MacDougall praised Blair’s efforts.
“[The] sale of 24 Hour Fitness brings to a close the final chapter of Ted Forstmann’s remarkable career as an investor,” said MacDougall, a member of the 24 Hour Fitness board who, as The Am Law Daily has previously reported, was given power of attorney by Forstmann to handle the liquidation of his firm’s assets after his death. “Elizabeth Blair has done an extraordinary job in leading the company to this very successful conclusion. I think that Ted would be very pleased with Elizabeth and her executive leadership team over the past 16 months.”
Blair, who once worked as MacDougall’s secretary, went on to graduate from Harvard Law School and work at Cleary Gottlieb Steen & Hamilton before serving as senior vice president of business operations at Yahoo and CEO of Brand.net, an Internet marketing company. MacDougall and Blair stayed in touch, and in February 2013 she was hired by 24 Hour Fitness as general counsel and chief strategy officer.
After being promoted to CEO, Blair helped the nation’s second-largest health club operator revamp its sales and marketing operations in anticipation of a potential sale. Last fall Akin helped the company beat back a class action suit filed by exercise instructors claiming they were not compensated for working overtime.
For outside counsel on the proposed sale, 24 Hour Fitness is relying on an Akin Gump team led by corporate partners David D’Urso and J. Kenneth Menges Jr., who heads the firm’s Dallas office and coheads its corporate practice.
Other Akin Gump lawyers working on the deal include former corporate partner Patrick Dooley—an American Lawyer Dealmaker of the Year in 2014 who left the firm earlier this year to become the first general counsel for activist hedge fund Corvex Management LP—labor and employment partner Donna Mezias, employee benefits partner Rolf Zaiss, litigation senior counsel Kristine Sendek-Smith, corporate counsel John Quinn and Nancy Sarmiento and associates Anthony Ameduri, John Howell and Karen Williams.
Fried, Frank, Harris, Shriver & Jacobson corporate partner Steven Steinman is leading a team from his firm advising New York-based AEA Investors on its end of the proposed 24 Hour Fitness acquisition. The other Fried Frank lawyers working on the matter include corporate partners Andrew Barkan, J. Christian Nahr and David Shaw. AEA, founded in 1968, is one of the nation’s oldest private investment firms.
AEA tapped Fried Frank for counsel last summer on the $1.5 billion sale of building products manufacturer CPG International to private equity owners Ares Management and the OTPP. In this instance, the OTPP has turned to longtime outside counsel Torys, a leading Toronto-based firm, in connection with its acquisition of 24 Hour Fitness.
Fitness Capital Partners, the third member of the group buying 24 Hour Fitness, is a fund organized by Dean Bradley Osborne and Global Leisure Partners. Robert Profusek, chair of the global M&A practice at Jones Day and an American Lawyer Dealmaker of the Week earlier this year, is leading a team from the firm advising Fitness Capital. The Jones Day team also includes tax partner Ronald Weitz and banking and finance partner Michael Butowsky. (Jones Day hired Butowsky from Mayer Brown in 2011.)
As for Akin Gump’s MacDougall, once dubbed “The Cleaner” by The American Lawyer in recognition of his skills in reputation management, his efforts to preserve Forstmann’s legacy were documented by Vanity Fair in a January 2012 feature story about Michael Ovitz’s ultimately ill-fated effort to wrest control of IMG.
Earlier this year, MacDougall wrote a piece for sibling publication The National Law Journal recalling the legacy of Bob Strauss, a former member of Forstmann Little’s advisory board who counseled Ted Forstmann on several high-profile deals, including the acquisition, turnaround and sale of aircraft manufacturer Gulfstream.
MacDougall, who visited Strauss in the hospital before his death, says one of the legendary lawyer’s last requests was to inquire about the pending sale of 24 Hour Fitness, at that point the last significant asset still owned by the firm cofounded by his good friend and longtime client. The tentative agreement to sell the company was signed two weeks after Strauss’ death.