Beleaguered Bally Total Fitness Holding Corp., the Chicago-based operator of more than 400 U.S. fitness clubs, was locked in battles with two of its largest shareholders Tuesday.
Pardus Capital Management LP, owner of a 14.4 percent stake in Bally, on Tuesday filed paperwork seeking a shareholder approval to install three of its preferred directors on Bally’s board.
The financial firm is seeking more control at Bally’s, which last week hired JPMorgan Securities Inc. to help it explore a sale, restated three years of earnings and filed its first financial results in 18 months, noting a $1.6 million loss in the most recent quarter.
Bally attempted to avert a proxy fight Monday by announcing it was nominating two of Pardus’ director candidates for the board, but the gesture was apparently not enough to satisfy Pardus.
“Our proxy stands,” said Karim Samii, managing director of the New York investment fund, rebuffing Bally’s nomination of two of its directors.
In a proxy battle, a company that wants to acquire or control another tries to persuade shareholders that the company’s current directors should be replaced. If shareholders agree, they sign proxy statements that give the outside company the right to vote their shares.
Pardus nominated Charles Burdick, 54, former CEO of London-based HIT Entertainment PLC; Barry Elson, 64, acting CEO of Telewest Global Inc.; and Don Kornstein, 53, founder and managing partner of Alpine Advisors LLC, for three seats on the nine-member Bally board.
Bally nominated Burdick and Elson and renominated Eric Langshur, founder and CEO of TLContact Inc. Langshur is the current chairman of the board’s audit committee, which last week completed the restatement of the company’s financial results for 2002, 2003 and 2004.
On Tuesday, Bally also announced it filed lawsuits in federal district court in Dover, Del., and Delaware Chancery Court to block its second-largest shareholder, Liberation Investment Group LLC, from seeking a vote that would give shareholders the power to remove the company’s chief executive.
Bally also accused Liberation of hiding, in filings with the Securities and Exchange Commission, its ties with Bally’s former chairman, Lee Hillman, who was ousted last year.
Emmanuel Pearlman, managing director of Liberation Investment, which owns 12.1 percent of Bally’s outstanding stock, said the lawsuits “are completely frivolous and we expect to prevail on everything.”
Paul Tolback, Bally’s chairman and CEO, said the proxy fight is the result of “two groups that are trying to take advantage of the situation.”
“I don’t think any of this is good for shareholders,” he said.
Tolback said the decision to place two of Pardus’ nominees on the company’s proxy was part of the company’s effort to defuse that proxy battle.
“We have been talking to them about understanding their views and what we could do to accommodate our shareholders,” he said, noting Bally also announced appointments of two new board members.
The company said Steven Rogers, a professor of finance and management at the Kellogg School of Management at Northwestern University, and Adam Metz, co-founding partner of Polaris Capital LLC, a Chicago-based real estate investment firm, have been named to two board vacancies.
Bally’s stock edged up to $7.17, near the high end of its 52-week range on the New York Stock Exchange.
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