Brunswick Corporation entered into a definitive agreement with KPS Capital Partners, LP (KPS) under which KPS will acquire Brunswick’s Fitness business and related brands, including Life Fitness, for $490 million in cash.

Life Fitness is a leader in commercial fitness equipment and game tables and furnishings. The company manufactures and sells its strength and cardiovascular equipment, billiards tables and accessories, and game room furniture under the brand names Life Fitness, Hammer Strength, Cybex, Indoor Cycling Group, SCIFIT and Brunswick Billiards.

Brunswick announced plans to spin-off the business last year to focus on its marine operations.

KPS is a leading investment firm focused on manufacturing and industrial companies across a diverse array of industries.

“We look forward to our future with KPS and are excited about this incredible opportunity to collaborate with a firm with a tremendous track-record of working with similar companies,” said Jason Worthy, president, Life Fitness. “KPS recognizes our world-class brand positioning, the value of our customer relationships, our iconic standing within the fitness industry, and our long-term earning potential. We will work closely with KPS to develop and execute a focused strategic plan centered around our mission to inspire healthier lives. We will build upon our long and successful history of product development and technology leadership, with the goal of providing the highest-quality solutions and services for a broad range of fitness facilities and fitness consumers.”

Jay Bernstein, a partner of KPS, said, “We are very excited to invest in Life Fitness, the leading global brand in fitness equipment. Life Fitness has the largest global installed base of equipment, with approximately two million pieces of cardiovascular and strength equipment used regularly by over 60 million people worldwide. We look forward to working with President Jason Worthy, his management team, and Life Fitness employees globally to build on this great platform and the company’s strong design, innovation and product development heritage. KPS’ track record of leveraging its capital, global platform, and commitment to investing in technology, innovation, growth, and customer service presents a tremendous opportunity for Life Fitness. We are exceedingly confident that Life Fitness will thrive as an independent company.”

Under the agreement, which was approved by Brunswick’s Board of Directors, KPS will pay approximately $490 million in cash to acquire the Fitness business and its brands. The transaction is expected to close during the second quarter of 2019, following receipt of regulatory approvals.

Following completion of the sale, Brunswick will be comprised solely of its global marine portfolio, which includes market-leading positions in propulsion, parts and accessories, boats and services.

“With the sale of the Fitness business, we sharpen our focus on Brunswick’s unique and formidable marine platform,” explained Brunswick Chief Executive Officer David Foulkes. “Brunswick has an impressive stable of recognized and respected brands and offers the right products and services uniquely concentrated in growing and emerging marine market segments. Brunswick is exceptionally positioned as a leader in the marine industry, and we are excited about the bright future ahead of us.”

The signing of the agreement is the culmination of a thorough process led by Brunswick directors Dave Everitt and Dave Singer that was designed to best position the Fitness business for the future and maximize value for Brunswick shareholders, according to Foulkes.

Foulkes stated, “As we considered avenues to separate our Fitness business, including a potential spin-off, we received strong buyer interest from a number of parties. After thoughtful evaluation of a range of options and a robust auction process, we concluded this sale is the best outcome for Brunswick and our shareholders. With some of the strongest brands and most accomplished people in the industry, the Fitness business is well positioned to succeed. We thank our Fitness employees for their many contributions to Brunswick and wish them well in the future.”

Brunswick had more than $4 billion annual revenue from its marine products and services in 2018. The Fitness business will be reported as a discontinued operation starting in the second quarter, matching the guidance already provided on a marine-only basis.

“Consistent with our communicated plans, our capital strategy is focused on maintaining a strong balance sheet, investing in organic growth initiatives and returning value to our shareholders. Importantly, we will work with our board in the near-term to refine plans to deploy the capital from this transaction to increase shareholder returns,” Foulkes concluded. “As we have previously described, likely options will include engaging in share repurchases, accelerating planned debt retirement, and deploying additional capital for mergers and acquisitions. Any benefits generated by these potential actions are not currently reflected in our 2019 capital plan or guidance.”

Citi served as the exclusive financial advisor and Cravath, Swaine & Moore LLP served as legal counsel to Brunswick on the transaction.