Bally Primed for Fight
By TONY COOKE
DOW JONES NEWSWIRES
December 7, 2005; Page C12
Insider buying is often interpreted as a sign of confidence in management, but at Bally Total Fitness Holding Corp. some big investors are buying shares while publicly complaining about how the company is run.
Three activist investors -- considered insiders under securities law because each holds a Bally stake in excess of 10% -- have expressed varying degrees of interest in pushing for change at the company. Bally Chief Executive Officer Paul Toback said he is gratified by the attention, but he won't be endorsing all of the investors' recommendations, particularly the suggestion that he be fired.
On Monday, the Chicago operator of fitness centers announced that it was adopting only part of the program of one investor and filing suit against another. The moves, Mr. Toback said, are efforts to avoid the distraction and expense of a proxy fight. "This is a company that doesn't need any more diversion of resources," he said.
Bally has endured more than a year of turmoil, culminating last week in accounting restatements going back to 2000. The company also announced last week that it is exploring alternatives and is considering seeking a buyer.
This year, with the restatements pending and a cloud of uncertainty over the company, Liberation Investment Group LLC, Pardus Capital Management LP, and Wattles Capital Management LLC each reported buying shares.
Liberation, run by Emanuel R. Pearlman, disclosed in November that it plans to seek the removal of Mr. Toback as chief executive. Bally responded with an announcement Monday that it has sued Mr. Pearlman, seeking to block his proposal and charging, among other things, that Mr. Pearlman "masquerades as a disinterested investor," but "has long been associated with Bally's former CEO, Lee Hillman, including serving as a consultant to Bally's management during Mr. Hillman's tenure."
Mr. Toback said Messrs. Hillman and Pearlman bear much of the responsibility for the company's problems. "Those two were directly responsible for adding mountains of debt to the company's balance sheet," he said. Mr. Hillman, who resigned from the company in 2002, has been accused by the company of contributing to Bally's accounting troubles.
A Liberation representative didn't return a call seeking comment.
Mr. Toback took a more accommodating stance toward Pardus Capital, a dissident shareholder that is trying to put three members on Bally's board. Along with the announcement of the Liberation lawsuit, Bally announced it will nominate two of Pardus's three board candidates.
"Our response was that we've taken into consideration their viewpoint and our desire to be responsive to our shareholders, and we think this strikes the right balance," said Mr. Toback.
Pardus, however, went ahead with its proxy solicitation, filing yesterday with the Securities and Exchange Commission to ask shareholders to put all three of its candidates on the company's board.
"At this point there has been no settlement reached between Pardus and the company regarding our preliminary proxy materials filed with the SEC," said Pardus President Karim Samii. |
