Fit Dragon unveiled as Land America taking over Nautilus commercial as Core Fitness

The sale of “certain” StairMaster and Schwinn Fitness commercial assets by Nautilus to Fit Dragon International is beginning to sound like an Abbott and Costello “who’s on first” routine*.

Here’s the scoop on the players, C. Reed Brown, general counsel for Land America, told SNEWS®:

• Land America, a China-based manufacturer for much of the Nautilus equipment line, formed Fit Dragon International and Core Fitness LLC.
• Fit Dragon is a corporation registered in the British Virgin Islands with headquarters in Hong Kong and is an affiliate of Land America acting as a distributor in Hong Kong.
• Core Fitness is a limited liability company that was registered in Nevada on Nov. 20, 2009, and that is also an affiliate of Land America.
• Once the Nautilus deal closes on Dec. 30, 2009, Core Fitness will do business in the United States as StairMaster.
• Core Fitness headquarters are now being set up in Vancouver, Wash., not far from Nautilus’ current headquarters.
• Although Land America, under the ownership of Michael Bruno, will continue to manufacture much of the equipment for Nautilus, it is not now the manufacturer of any of the StairMaster and Schwinn equipment that falls under its management. Per the deal announced Dec. 9, 2009, Land America/Fit Dragon/Core Fitness now owns all of StairMaster and owns the license to the indoor cycling business of Schwinn.

In terms of personnel involved:

• Brown has been general counsel for Land America (www.laxiamen.com) since about 2004. He is a former executive with Health Rider before it was purchased by Icon Health & Fitness, and he was general counsel and on the board at Direct Focus, helping to take that company public and change its name to Nautilus before he resigned in 2001.
• Bruno and Brown remain principals behind the current commercial deal.
• Faces at the new StairMaster company will be familiar ones.

“We’re in the process of hiring most of the key personnel from Nautilus who managed these key brands,” Brown told us. He added that Sebastien Goulet, who resigned days before the deal came down from Nautilus where he was general manager of the Nautilus commercial business and senior vice president of manufacturing, will not be on the new team. Brown declined comment on the coincidental nature of the timing.

To read more details about the deal in a Dec. 16, 2009, SNEWS story, “Fit Dragon purchase of Nautilus commercial assets sends industry down the rabbit hole,” click here. 

Land America/Fit Dragon paid $10.9 million in cash of the $12.3 million deal, with the remaining $1.4 million being an assumption by Land America of liabilities. That is nearly equal to the $10 million that Nautilus eventually paid to Land America when it had planned to acquire Land America and then cancelled the agreement: Nautilus paid $8 million in June 2008 to settle a dispute between the two companies that arose when Nautilus in January 2008 cancelled its January 2007 purchase option agreement to acquire the assets of Land America for $72 million. Nautilus had already paid a $2 million non-refundable option fee to Land America at the time of the execution of the option agreement in early 2007. Click here for a May 5, 2008, SNEWS financials report, “One-time costs hammer Nautilus’ Q1.” 

Brown, whom we caught on his cell phone between flights on his way home from Vancouver, said more details will be available on the new company, its management and direction after the transaction closes in 12 days. Setting up the new company in Vancouver was a simple decision, he explained, since it makes hiring the staff, many of whom live in the area, easier.

“It helps with the transition,” he said. Regarding how Nautilus and Core Fitness will sell and market some products using the same brand names, Brown agreed that a long history of working together will help.

“This is why we need a close working relationship with each other,” he said. “And we have that. We’ve built it over the years.”

Part of the deal with Nautilus includes an agreement for various administrative services to ensure the transition in the next few months is seamless.

With the agreement in place and a scramble on to hire a team and set up offices, Reed noted “there are lots of things in play.” But business should operate as usual.

“No customers,” he said, “should see any change in how they’ve done business.”

–Therese Iknoian

* Click here to read the Abbott and Costello routine if you are not familiar with it.