Infinity Spas has agreed to purchase the hot tub manufacturing assets of Keys Backyard, LP. The move would make the young company one of the larger spa makers in America.

Dave Hatley, president of the Johnson City, Tenn.-based manufacturer, said the deal with Keys will close Dec. 1.

Keys is a Dallas-based manufacturer of fitness equipment such as stationary bikes and elliptical trainers. The company will continue to make exercise equipment, but is getting out of the business of building spas for sale in big-box stores such as Wal-Mart and Costco.

“I think the downturn in the spa market this year made it harder for Keys to justify the investment it takes to provide their spas for mass merchants,” Hatley said.

Keys acquired the Image Spa line from Utah-based ICON Health & Fitness in 2005, a year after spa sales in North America hit an all-time high. At the time, Keys predicted 30 percent to 50 percent in annual growth for its new spa line, but the industry had begun a slide just as the deal was finalized.

Spa sales are expected to finish this year nearly 17 percent below the 2004 peak of 450,000 units, according to projections by the Association of Pool & Spa Professionals.

Representatives from Keys could not be reached for comment by press time.

Steve Hammock, president of Vista, Calif.-based Watkins Manufacturing Corp., said he was not surprised to learn that Keys has left the spa business.

“ICON was not able to make it a profitable venture, and I think Keys ran into the same problems,” Hammock said.

Infinity Spas are sold through dealerships, but also in large retail outlets where Keys sold its spas. Hatley said his company will acquire Keys’ 200,000-square-foot plant in Garland, Texas, and plans to retain the 125 employees who build its hot tubs.

“The only thing that will change for them is who signs their paychecks,” Hatley said. He added that after the Keys deal closes, Infinity’s work force will grow to approximately 325.

Infinity Spas, which began full-scale operations in 2005, soon will be making a total of about 25,000 spas annually in the Garland plant and an expanded 200,000-square-foot facility in Tennessee, Hatley said. If that prediction holds, it could make Infinity the third largest U.S. spa manufacturer.

“The way we look at things,” Hammock said, “if that number of 25,000 annually is true, [Infinity] would probably fall into that third slot.”

The acquisition of Keys’ spa assets succeeded where Infinity’s desire to buy the assets of bankrupt hot tub manufacturer Hydro Spa failed.

Hatley said in October that he was “95 percent sure” he’d close a deal to buy the St. Petersburg, Fla.-based Hydro Spa’s assets. But he said the purchase fell through when executives of the company that filed for Chapter 11 bankruptcy protection on Sept. 19 “changed their minds.”

Hydro Spas’ assets were put up for public auction on Nov. 9.