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Transaction Basics of the Life Time Fitness Merger

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Basics of the transaction

The Life Time Fitness (LTM) merger is a private equity transaction where the target is being bought out for cash. The buyer is a consortium of private equity buyers:

  • TPG Capital Management
  • LNK Partners
  • Leonard Green & Partners
  • Bahram Akradi, Life Time Fitness CEO

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Terms of the transaction

As a result of the Life Time Fitness merger, shareholders will receive $72.10 in cash per share.

Conditions precedent

The following conditions need to be satisfied in order for the deal to close:

  • Life Time Fitness shareholder vote
  • Hart-Scott-Rodino antitrust filing
  • any other government approvals
  • U.S. Securities and Exchange Commission approval of the proxy statement
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Non-solicitation

Life Time Fitness has a non-solicitation agreement with a fiduciary out. This means that prior to shareholder approval of the transaction, Life Time Fitness could discuss another merger if approached by another suitor.

First, the Life Time Fitness board of directors would have to determine that such discussions could lead to a bona fide offer, and that such an offer would likely result in a higher bid for the company. Life Time, however, is not permitted to shop itself around.

Breakup fee

In the event another bidder comes in and tops the consortium bid, it will owe a breakup fee of $97 million.

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Financing

The consortium has delivered executed commitment letters to Life Time Fitness covering the expected debt financing as well as the equity commitments on the part of the private equity buyers.

Other merger arbitrage resources

Other important merger spreads include the deal between Salix Pharmaceuticals (SLXP) and Valeant Pharmaceuticals (VRX) or the merger between Pharmacyclics (PCYC) and AbbVie (ABBV). For a primer on risk arbitrage investing, read Merger arbitrage must-knows: A key guide for investors.

Investors who are interested in trading in the consumer discretionary sector should look at the Consumer Discretionary Select Sector SPDR Fund (XLY) or the iShares Global Consumer Discretionary ETF (RXI).

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