24 Hour Fitness Worldwide, Inc. | Major Expansion in the Mid-1990s
Major Expansion in the Mid-1990s
The 24 Hour Nautilus chain was stable enough that Mastrov could now approach McCown De Leeuw & Co., a Menlo Park, California private equity investment firm, for funds to accelerate the company's expansion. McCown invested $30 million, money that was then put to use in 1995 when 24 Hour Nautilus acquired the Ray Wilson Family Fitness Center chain and its 68 Southern California units. A year later the company changed its name to 24 Hour Fitness, although many of the clubs continued to operate under the 24 Hour Nautilus name. During this period the company also began to expand beyond the California market, acquiring smaller chains in the Pacific Northwest and Southwest, as well as Hawaii. Schlemm also departed the company to pursue other opportunities, leaving Mastrov to run the enterprise.
In 1997 24 Hour Fitness filed to make an initial public offering (IPO) of stock. The decline of the stock market in October of that year, however, scuttled the offering. Instead, the company conducted another equity round, raising $75 million. 24 Hour Fitness then used some of that money to take its first international steps. In 1997 Fitness Holdings Europe Ltd. was formed, followed a year later by Fitness Holdings Asia. In 2000 these entities were merged with the domestic operation to create the present-day 24 Hour Fitness Worldwide, Inc. In 1998 and 1999 the company acquired health clubs in Sweden, Norway, and Denmark, then in 2000 opened centers in Germany and Spain. But management soon grew wary of the European market and elected to pull out. In the meantime, Ray Wilson, who had sold his fitness chain to 24 Hour Fitness in 1995 and briefly worked for the company, had built a new chain of fitness centers in Asia, which he then sold to 24 Hour Fitness in 2000. Some of these units were shed, but the company continued to operate centers in Hong Kong, Singapore, Korea, and Taiwan.
Although the company was still thwarted in its efforts to stage an IPO, 24 Hour Fitness had little difficulty finding backers. In 1999, new investors were brought in during a recapitalization of it, concurrent with another equity round. In 2001 24 Hour Fitness completed its seventh round of private investment, raising another $85 million. All told, since McCown De Leeuw's first investment in the mid-1990s, 24 Hour Fitness had amassed more than $500 million in equity from the likes of New York firms Triumph Capital, Lexington Capital, Blackstone Group, and Teachers Pension Fund, and Houston-based Rice Capital.
At this point, the company was opening 20 to 25 clubs a year, as revenues approached the $1 billion mark. In addition to attracting investors, 24 Hour Fitness was forging alliances with celebrity athletes. Basketball star Magic Johnson joined forces with 24 Hour Fitness to open athletic facilities in underserved urban neighborhoods. The first Magic Johnson Sports Club opened in Richmond, California, in 2001, and over the next two years five others followed, the facilities located in Los Angeles, Dallas, and the San Francisco Bay area. Tennis player Andre Agassi also became involved with 24 Hour Fitness, developing his own signature fitness club. The first of four 24 Hour Fitness Agassi Super Sports Club facilities opened in Las Vegas in February 2004. A key reason Agassi chose to partner with 24 Hour Fitness was the chain's 2003 agreement with the U.S. Olympic Committee in which the company became a sponsor for the next three Olympics. In addition, 24 Hour Fitness established a Commitment to Athletes Support Program, which granted club memberships to eligible athletes training for both the summer and winter Olympic Games. The company also donated equipment to upgrade U.S. Olympic training centers in Colorado Springs, Colorado; Lake Placid, New York; and Chula Vista, California, as well as provided training equipment at High Performance Centers.