Shares of Bally Total Fitness Holding Corp. teeter-tottered Tuesday after the fitness-club chain said it was considering a poison-pill defense because two of its largest shareholders, L.A.-based Liberation Investments LP and Pardus Capital Management LLC, may be conspiring on a takeover.
Chicago-based Bally announced Friday that it was “considering its options” about whether Liberation and Pardus have triggered its stockholders rights plan, which allows the company to issue discounted shares to stockholders except the acquirers, diluting its ownership stakes.
The plan is triggered when a person or group acquires more than 15 percent of the company’s shares. Liberation owns a 10.9 percent stake; Pardus owns14 percent.
Liberation and Pardus have called for the overhaul of Bally’s board of directors and the ouster of Chief Executive Paul Toback.
Bally said it has evidence of ties between Liberation and Pardus, which shows they’re acting together. Bally said Liberation’s General Manager Emanuel Pearlman has longtime ties to Don Kornstein, founder and managing partner of Alpine Advisors LLC, whom Liberation nominated as a candidate on the slate of Pardus European Special Opportunities Master Fund.
On Friday, Liberation responded that it had no “agreements, arrangements or understanding with (Pardus) with respect to the voting of Bally shares and management has no reasonable basis to claim otherwise.” It also said that Bally’s action was “an outrageous abuse of the corporate machinery to protect (Toback)” in its use of a poison pill strategy to deny shareholders the right to vote for his ouster.
Liberation said Bally management was aware of the relationship and only objected when Liberation announced its shareholder proposal to amend company bylaws and allow investors to oust Toback by a majority vote.
A federal court on Thursday dismissed Bally’s motion for a preliminary injunction preventing Liberation from presenting a shareholder proposal at Bally’s upcoming annual meeting. Liberation sued Bally in Delaware Chancery Court on Dec. 11, saying its takeover defense was designed only to protect directors.
Bally rose 0.9 percent to settle at $5.95 on Tuesday after falling as low as $5.85 earlier in the day.
