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TPG Capital buys stake in CAA

Duo form strategic partnership, committed to create a $500 mil fund

In a seismic move in the Hollywood agency world, TPG Capital has bought a non-controlling 35% stake in Creative Artists Agency for an undisclosed price.

In an announcement Friday, TPG and CAA also said they’ve formed a strategic partnership and committed to create a $500 million fund. The deal was driven by CAA’s desire to diversify aggressively into other businesses, moves that require ready access to capital. The association with TPG will also keep CAA plugged into opportunities on the M&A and investment banking circuit.

The deal comes a little more than a year after the William Morris Agency and Endeavor shook the agency universe by merging — challenging CAA’s longtime status as the leading Hollywood agency. In 2006, ICM underwent a recapitalization in a deal with Rizvi Capital and Merrill Lynch.

TPG, formerly Texas Pacific Group, controls $47 billion in capital. It’s previous showbiz forays include being part of the group, along with Sony Corp. and Comcast Corp. and other private investment shingles, that bought MGM for $5 billion in 2004.

“CAA is the clear leader within its industry and the talent agency most trusted by successful actors, directors, writers, producers, musicians and athletes,” said David Bonderman, TPG founding partner. “Over its history, the company has demonstrated a consistent ability to identify nascent opportunities and expand into new markets.”

CAA’s managing partners, who have committed to long-term deals, said the partnership with TPG will help it continue to expand — “through capital investments that build upon our full-service platform, new business leads developed through TPG’s extensive worldwide relationships, expert insight on the international marketplace, and a myriad of other ways.”

CAA president Richard Lovett added, “We have known and respected the leaders of TPG for a long time, and believe this strategic partnership marks a new starting point for the agency’s future.”

The price tag for TPG’s 35% stake was not immediately clear, but in recent months as CAA had fielded proposals to investors for partnerships, the percentery was valued as high as $700 million to nearly $1 billion. CAA’s seven-member board will grow to10 with the addition of three TPG reps, including co-founder James Coulter.

Some of the TPG coin flowing into the agency will be redistributed to staffers.

CAA noted that as part of its diversification push, the agency entered the sports business in 2006 and currently represents more than 650 of the world’s most important athletes, coaches, broadcasters, teams, leagues, venues and marketers. In 2008, CAA partnered with the former team from Merrill Lynch’s Media and Sports Structured Finance Group to create an investment bank Evolution Media Capital that has since raised or advised on more than $2 billion in media and sports transactions.

The investment bank’s transactions have included repping the buyers of MLB’s Texas Rangers; structuring Sony ATV’s $300 million of debt financing for its 50% ownership of the Beatles library; advising the establishment of animation film studio Illumination; raising and structuring the debt for a $245 million film fund for Participant Prods., and raising $100 million for a National Geographic film fund.

The announcement noted that CAA has grown internationally, with offices in London and China, and has a digital media practice, a marketing operation with clients including Coca-Cola, Dell, and Mattel, and a division representing game designers.

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