BALLY <BLY> SEEN SELLING OFF HEALTH UNIT Bally Manufacturing Corp's proposed public offering of 24 pct of its Health and Tennis Corp unit is seen as the first step towards the sale of the entire unit, analysts said. "In the longer-term horizon, Bally wants to concentrate on its gaming businesses," said analyst Dennis Forst of Seidler Amdec Securities Inc. Last week, Bally said it was considering the sale of another non-casino unit, its Six Flags amusement park unit, which analysts said could fetch about 300 mln dlrs. Bally spokesman Bill Peltier said "the company currently has no hard plans to the sell any more of the health club company, but in the long term we'll wait and see how the offering goes." Once Bally's biggest revenue producer, the health club unit had 1986 operating income of 60 mln dlrs on revenues of 456.2 mln dlrs, 28 pct of Bally's revenues. Analysts estimate the unit could be sold for for 300-500 mln dlrs. Analysts said Bally's decision to offer shares in the unit could be the first step to selling it. "It would seem obvious that an offering would decrease the health club unit's debt, increase its cash flow and operating income, making it an attractive buy to a third party," Steven Eisenberg of Bear Stearns said. On Monday, Bally said it filed with the Securities and Exchange Commission for an initial offering of 24 pct, or 5.8 mln shares, of the unit's common stock at 13-15 dlrs a share. About half the proceeds, 40 mln dlrs, will be used to reduce parent Bally Manufacturing's debt which has swelled to 1.6 billion dlrs due to recent hotel acquisitions and the purchase of shares from Donald Trump who had threatened a hostile takeover, according to Bally treasurer Paul Johnson. Remaining proceeds from the stock offering and from a separate offering of 50 mln dlrs of 20-year convertible subordinated debt would be used to repay about 75 mln dlrs of short term senior bank debt of the health chain unit, a Bally spokesperson said. Analysts said Bally's health club unit's profits have remained strong, but are skeptical about the industry's long range prospects. "The fitness club industry, over the last 10 years, has grown tremendously, but the question is whether its a fad or a permanent part of our lifestyle," said Eisenberg of Bear Stearns. Analysts said fitness clubs will likely flourish if the public stays at its peak of health consciousness, but that overcapacity is likely to occur as consumer enthusiasm wanes. In addition, "the returns in the fitness club industry are just not as high as they are in the gaming industry," said one analyst. There are about 6,500 fitness clubs in the U.S., excluding clubs run by not-for-profit organizations, according to the Association of Physical Fitness Centers who estimates it to be an 8.0-billion-dlr-a-year industry. Asked if anyone has offered to buy the unit, which is the nation's largest health club chain, Peltier said, "no one has the money to offer to buy it." "The fitness industry is a fragmented industry with no leader and there is a great opportunity for growth through acquisition and then standardization," said Wayne LaChapelle, chief financial officer of Livingwell INc <WELL>, the nation's second largest fitness chain operator whih LaChapelle said Livingwell is always interested in acquisition opportunities but "could not afford an acquisition the size of Bally at this time."