Bally Total Fitness Corp. asked investors for support as the troubled health-club chain approaches the final days of its battle with two hedge funds.
In a letter released yesterday, Chicago-based Bally urged shareholders to vote against proposals from hedge funds Pardus Capital Management and Liberation Investments that seek to fire CEO Paul Toback and overhaul the company’s board.
Shareholders have until the Jan. 26 annual meeting to vote.
“It has become clear to Bally’s Board of Directors and management that the sole agenda of these two hedge funds is to disrupt the Board’s strategic process in favor of their own narrow interests,” the company said in its letter.
Bally said its management team is implementing a successful turnaround plan that has boosted operating income, lowered costs and corrected previous accounting problems.
After months of negotiations, Bally said it has failed to reach a settlement with the two hedge funds, which have been critical of Toback and the board.
The major bone of contention, according to several shareholders, was a request by Pardus to throw out a multi-million dollar stock option package proposed by Bally’s board.
The package, which has to be approved by shareholders, grants 2.5 million shares to Toback and other executives and allows them to cash out of those shares when the company is sold.
In December, Bally put itself up for sale and hired The Blackstone Group and J.P. Morgan to search for buyers.
A spokesman for Pardus declined to comment on the negotiations.
Meanwhile, Bally continues to wage a legal battle against Liberation even after a Delaware court ruled in late December that the hedge fund could proceed with its proposal to oust Toback.
Shares of Bally rose 3 percent yesterday to close at $6.88.