Long-term control issues could be a concern for WME, ICM as sale process advances
Industry sources say that IMG’s rivalry in the sports representation and marketing business with CAA may have played a part in the latter getting axed from the process. Sources say at least four groups have moved on to the next phase of the process, which includes a deeper dive into IMG’s books. Those are WME and its equity partner Silver Lake; Carlyle Group and ICM Partners, private equity giant Kohlberg Kravis Roberts and Euro investment firm CVC and Chernin Group.
SEE ALSO: The State of the Agency Biz
There’s speculation that Alexey Miller, chairman of Russian gas and oil con glom Gazprom, is also a contender for the agency that is now owned primarily private equity giant Forstmann Little.
CAA and IMG have had a testy relationship for the past decade after a clutch of top IMG reps migrated with key clients to the CAA fold, as that agency aggressively built up its sports biz under the direction of prexy Richard Lovett. Insiders at IMG, some of whom may seek to stay with the company after a sale, were cautious about giving the CAA-TPG team a close look at the books because they are direct competitors in many arenas.
A source close to the situation said CAA has moved on from IMG and has no intention of fielding a sweetened bid. Internally, it’s understood that there was some nervousness about the size of the transaction and that fact that the control now wielded by the core group of CAA managing partners would be significantly diluted if TPG wrote a $2 billion-plus check to merge the two agencies.
The question of control of the larger entity after a merger may also be a concern for WME insiders as they evaluate the prospects for a large transaction undertaken with Silver Lake. At present TPG owns a 35% stake in CAA. Silver Lake has a 31% stake in WME.
Carlyle Group, meanwhile, has teamed with ICM Partners to field a bid. ICM’s intentions toward IMG were unclear until earlier this week. The company just last year extricated itself from a complex ownership arrangement with investor Rizvi Traverse Management, transforming into a partner-owned agency. Some thought it was unlikely the agency would be up for a deal that would involve private equity money so soon after the Rizvi divorce.
Because of its growing sports operations, CAA was seen as the prime agency contender for IMG. Sources close to the agency said CAA’s seven managing partners were unified in their decision to pursue IMG with TPG, but the level of CAA’s interest was exaggerated and that the partners are confident they can continue to build operations on their own.
Informed sources said the bidding for IMG was running from $2.2 billion to $2.7 billion. CAA’s bid was said to be on the low end of that scale.
Sources said the remaining bidders are to receive more detailed disclosures this week but the timetable for submitting the next offers remains unclear. Morgan Stanley and Evercore are managing the sale process for Forstmann Little.
A rep for IMG declined comment.