Both CDC and Bally, however, are unaware of the grand scope of Fatjo's vision -- and each, ironically, has confirmed the soundness of his strategy. CDC is doing one-half of his projected business; Bally is doing the other.
Living Well, Fatjo explains, has fashioned a seven-point strategy -- and the tone of his voice makes clear that he regards those seven points as carved in stone. It has been more than two years since he and the Kuntzlemans made contact, and Fatjo, his environment, and what he is doing have all changed. He has moved out of his house on the grounds of The Houstonian and into the hotel, in part because of the demands of a hectic travel schedule. He is still tall and lean, an obvious runner, but now he is more tan, with longer hair that curls behind his ears: Less Texan, it might be said, and a bit more Hollywood. The only incongruous detail is the declasse Coke he sips as he enumerates the seven points:
1. To identify 50 major markets that Living Well can operate in (later he admits that the number will probably rise to 70).
2. To put two or three salespeople in each market to sell the Living Well program to corporations.
3. To acquire in each market at least 10 "satellite" athletic facilities where Living Well graduates and the general public alike can pursue "a lifetime of health and fitness."
4. To acquire, in each of the principal markets (New York, Chicago, Los Angeles, and Atlanta), a "premiere" facility comparable to The Houstonian.
5. To develop an extensive line of products ranging from diet foods to expensive exercise equipment.
6. To initiate a major public-relations effort aimed at making Living Well a household word with the 80 million Americans who exercise regularly.
7. To develop a shareholder base of individuals committed to the goal of personal fitness.
It is a demanding agenda, combining CDC's emphasis on fitness programs with Bally's focus on athletic facilities. What makes it credible is Fatjo himself, who brings to the enterprise a breadth of vision and a depth of experience that is hard to match. "Fatjo's a unique critter, even in this city," remarks one Houston banker who has done business with him. "These days, everybody seems to be looking for his niche -- his little hole in the great market wall. Tom stakes out the whole goldarn wall."
Fatjo has already laid a solid foundation for the enterprise. Realizing that the monumental financial demands of the undertaking were more than he and his partners in The Houstonian could shoulder, he quickly made plans to fold the assets of The Houstonian into Living Well, then take Living Well public; in May of this year he completed a stock offering that raised $5 million. He had done much the same thing with BFI. In that case, Fatjo had folded his own company, American Refuse Systems Inc., into publicly held Browning-Ferris Machinery Co., of Dallas and Houston, which provided him with much of the capital he needed to buy out trash collectors.
This time, Fatjo significantly underestimated the cash requirements of his new mission: Athletic facilities do not come cheap. "I really didn't know so much capital was going to be required," he concedes, taking a sip of warm Coke.
For nearly a year, Fatjo and another Houston businessman, Dr. LeRoy A. Pesch, had wanted to do something together. Pesch, formerly of Chicago, is chairman and chief executive officer of Health Resources Corp. of America (HRCA), which owns and operates three hospitals in the United States, and had been drawn to Houston by its concentration of health facilities -- The Methodist Hospital/Baylor University complex, The Preventive Medicine Institute, the Scurlock Center, and The Houstonian. Pesch and Fatjo soon got acquainted, and developed a mutual respect. Fatjo "has an enormous amount of leadership presence in the fitness industry," observes Pesch.
The needs of their companies, they realized, might easily mesh. HRCA, on the one hand, was determined to move beyond the traditional role of caring for the sick. "There was an emerging need," explains Pesch, "to provide preventive medical services, and, beyond that, to move into the wellness field." Living Well, which had its own preventive medicine center and was devoted to corporate health, seemed a perfect partner. To Fatjo, on the other hand, HRCA's capital resources and impeccable medical credentials were equally alluring. In July of this year the two companies announced that they would merge, in a cash-stock transaction valued at $40 million, with Houstonian Inc. becoming a wholly-owned subsidiary of HRCA.
At last Houstonian seemed solidly positioned to begin acquiring the facilities Fatjo wanted. "In the next two years," said Fatjo, "we'll be able to effectively utilize approximately $100 million of capital." HRCA, which had seen its revenues shoot from $86 million in fiscal 1984 to a projected $200 million for fiscal '85, was ready to foot the bill.
But then, in August, one of those pitfalls that mark progress along any interesting path caused Houstonian to stumble. HRCA, reconsidering its move away from the hospital-management field it knew so well, decided against the proposed merger, leaving open the possibility, for awhile, of some other, unspecified joint venture. But then, late in the month, both parties broke off conversations. There would be no combined effort. For Houstonian, which had predicated its aggressive acquisitions program on HRCA stock, it was an obvious setback, but far from a dead end. "This leaves us -- in terms of our goals and strategy -- essentially where we were before the merger was suggested," notes Houstonian president Michael J. Milner. Houstonian, he adds, intends to keep to its acquisitions schedule, making use of other options.
Fatjo, who is now talking with other "investors," has become, if anything, more optimistic. "You know, when you play in a football game, before you go out on the field, you're always nervous," he explains. "Then somebody hits you pretty hard, and, boy, that nervousness goes away, and you get on with the game . . . ."
Flexibility is, after all, one of the hallmarks of Fatjo's style. "That's Tom's genius," says Charles Kuntzleman. "His ability to push against the market, see where it's going to give, and, when it doesn't work, an amazing capacity to just turn 180 degrees, and head off in another direction . . . . I'd be bullheaded, and keep banging away."
The Living Well staff is continuing to market its programs to corporations and institutions, and has made clever use of Fatjo's public involvement to get its name and its blazing red, white, and blue logo before the masses. A member of the President's Council on Physical Fitness & Sports since 1980, Fatjo was asked by council chairman George Allen to put together a Fitness Classic -- a competition featuring businesspeople, celebrities, and media representatives that would call attention to the importance of fitness. Fatjo not only developed the program, he donated The Houstonian's facilities, and for the past three years has hosted such stellar Classic contestants as Suzy Chaffee, Roger Staubach, and Rafer Johnson. When Allen envisioned National Fitness Testing Week -- an opportunity for millions of Americans to check their overall condition -- Fatjo helped manage the program and arranged a Houstonian tie-in. Today, the lobby of Living Well headquarters is festooned with flags and huge photos of Allen, Staubach, Fatjo, and President Reagan. "Keeping America physically fit has been done through the private sector and the unselfish voluntary efforts of people like yourself," reads a large Reagan quote. It is a patriotic brand of capitalism that sells increasingly well.
