Bally adds physical therapy In deal with company in N.J., fitness clubs to offer rehabilitation


August 19, 1998|By Kristine Henry | Kristine Henry,SUN STAFF

Bally Total Fitness Holding Corp. and Kessler Rehabilitation Corp. announced a joint venture yesterday in which Kessler will operate physical therapy centers within Bally fitness clubs.

Bally -- which has a 400-employee regional service center in Towson and 12 fitness centers in the state -- and Kessler of West Orange, N.J., will have equal control over the newly created KR/BTF LLC.

Dave Southern, a Bally spokesman, said the companies have yet to decide which clubs will be renovated to include the rehabilitation centers, although at least one Maryland location will have one.

The companies plan to open up to 100 rehabilitation centers nationwide. "It will take a few years to get to that," said Southern. "The plan is that by the beginning of '99 we'll have 10 operations. We're focusing on New Jersey and New York to begin with, and then rolling forward."

Each rehabilitation center will be about the size of a racquetball court -- between 600 and 1,000 square feet -- and won't make an appreciable difference in the size of the 30,000-square foot clubs, Southern said.

The deal was formed so that Bally could increase business during its relatively slow daytime hours and so that Kessler, a privately held company that recently switched from nonprofit to for-profit status, could expand its reach and boost revenues.

"Kessler was looking to grow nationally," said Kathy Lewis, a Kessler spokeswoman. "And there's a natural link between health and fitness and rehabilitation and fitness."

Andrew Zarnett, an analyst at Ladenburg Thalmann in New York, said the deal makes sense. "There's a great synergy between both companies," he said. "It gives Kessler new locations, and it gives Bally the opportunity to provide additional service to increase revenue and give people exposure to the clubs who will maybe think it's a good idea to join."

The companies did not disclose terms of the venture, but Zarnett said each is contributing about $1.5 million over four years.

"I can't speak to Kessler, but with Bally bringing in $800 million a year in revenue, there is no downside," Zarnett said. Southern said Bally will offer free 30-day memberships to clients once they finish therapy in the hope of increasing regular membership.

The centers, to be called Kessler Physical Therapy and Rehabilitation at Bally Total Fitness, are not unique for either party.

Bally operates three facilities in Florida for publicly held ContinueCare Inc., and Kessler has operations in six small, locally owned health clubs in New Jersey.

"We have found health clubs to be convenient and user-friendly locations in which to provide physical therapy and rehabilitation services," Kenneth W. Aitchison, president and chief executive of Kessler, said in a statement.

Bally's shares were up 87.5 cents yesterday, closing at $24.31.

Pub Date: 8/19/98

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