BowFlex, Inc., formerly Nautilus, Inc., entered into a purchase agreement with Johnson Health Tech Retail, Inc. to serve as the Stalking Horse Bidder to acquire substantially all of the company’s assets for $37.5 million in cash at the closing of the transaction, less closing adjustment amounts for accounts receivable, inventory and certain transfer taxes.
The agreement comes two weeks after Bowflex said in its last quarterly financial report that the company believed that conditions would not improve in the next several quarters, negatively affecting its liquidity projections. Management determined there was substantial doubt about the company’s ability to continue as a going concern for 12 months.
The Bowflex, Inc. Board of Directors recently approved a plan the company had been working on to retain key executives as the business continues to shed sales and credibility. Under certain Award Agreements under its so-called Executive Compensation Plan, the company and certain members of its executive management, specifically Jim Barr, Aina Konold, Alan Chan, John Goelz, and Becky Alseth, are bound to the terms and conditions of the Executive Compensation Plan upon execution of each member’s applicable Award Agreement (read SGB Media’s coverage here).
To facilitate the sale process, Bowflex and certain of its subsidiaries voluntarily initiated a Chapter 11 proceeding in The U.S. Bankruptcy Court for the District of New Jersey, which will allow interested parties to submit competing offers. Additionally, subject to court approval, Bowflex secured a $25 million facility for debtor-in-possession (DIP) financing, comprised of a $9 million revolving commitment and $16 million term loan reflecting the roll-up of the company’s pre-petition term loans of approximately $16 million from Crystal Financial, LLC d/b/a SLR Credit Solutions (SLR) and its affiliates, subject to court approval, to enable Bowflex to continue operating in a normal course and to meet its financial obligations to employees, vendors and its continued provision of customer orders during the Chapter 11 proceedings and while executing the sale process.
The DIP Facility is being provided by SLR pursuant to an amendment to the company’s existing Term Loan Credit Agreement with SLR dated November 30, 2022.
“For decades, BowFlex has empowered healthier living and enabled consumers to reach their fitness goals with our innovative home fitness products and individualized connected fitness experiences. As a result of the post-pandemic environment and persistent macroeconomic headwinds, we conducted a comprehensive strategic review and determined this was the best path forward for our company,” said Jim Barr, CEO of BowFlex, Inc. “We are fortified by the potential partnership with Johnson Health Tech and encouraged by the multiple parties that have indicated an interest in bidding for our company. Our goal is to maximize value for our stakeholders through this process.”
Bowflex is seeking approval of the proposed transaction pursuant to Section 363 of Chapter 11 of The U.S. Bankruptcy Code, allowing outside interested parties to submit better offers. The transaction is subject to approval by The U.S. Bankruptcy Court, any other approvals that may be required by law and other customary conditions.
The Asset Purchase Agreement with the Stalking Horse Bidder provides standard bid protections. These protections include
- the reimbursement by the company of up to $600,000 of the Stalking Horse Bidder’s expenses payable under specified circumstances upon termination of the Stalking Horse Asset Purchase Agreement;
- payment by the company of a breakup fee of 3.5 percent of the Purchase Price; and
- Bowflex’s forfeiture of the $3.75 million Stalking Horse Bidder’s deposit.
Sidley Austin LLP and Holland & Hart LLP serve as legal advisors to BowFlex. FTI Consulting, Inc. and FTI Capital Advisors, LLC were retained as financial advisors and investment bankers to BowFlex to manage the sale and auction process.
Image courtesy Bowflex, Inc.
