What analysts are saying: Buyout rumors at Life Time Fitness

On March 5, the Wall Street Journal reported that two private equity groups were in advanced talks to take Chanhassen-based health club chain Life Time Fitness private. The paper reported that KSL Capital Partners and another firm were working on a potential bid.

Subtle clues to the bid may have surfaced in the wording of the company's recent news releases. Life Time started a strategic review of plans to split the company into an operating company and a property company last August and was expected to offer an update on that process when it reported fourth quarter and year-end results on Feb. 26.

"The language in the release from the Q3 release to the Q4 release changed materially," said Piper Jaffray analyst Sean Naughton. "It was a subtle nuance, but that was our clue."

That small change in language convinced Naughton there was validity to the WSJ report.

Life Time stock was bid up considerably before the company announced it would examine splitting the company's real estate assets into a real estate investment trust in August. On March 6, Life Time stock rose another 15 percent on the takeover talk to close at $66.32.

Life Time stock started at $42 per share before the August REIT announcement, and Naughton thinks the combined value of an operating company and property company would be around $69 per share.

A private equity bid for the company would presumably be somewhere north of that mark.

The Analyst Ratings Network is a news service that tracks analysts' ratings. It tracks 50,000 ratings on 7,000 companies. The group recently looked at all those ratings to see which companies in the last month had the highest average ranking among analysts. Companies had to have coverage from at least four analysts to be eligible for the "most loved companies" list. The Minnesota company appearing highest on the list was Entellus Medical, a medical device company based in Plymouth that completed an initial public offering in January. It is covered by four analysts, all with "buys."