Rizvi Traverse shops its post-buyout ICM portfolio

Equity firm seeks sale of backend stakes retained after agency reorg

In the management buyout of ICM that was completed last month, Rizvi Traverse Management, the private equity firm that held a major stake in the agency, retained a lucrative portfolio of backend stakes in TV shows, movies, books and theatrical productions that ICM had amassed over 40-plus years.

Now industry sources say Rizvi is talking to other private equity and hedge fund players about a possible sale of that portfolio. Rizvi is said to be seeking nearly $200 million for these backend stakes, which do not include any interest in the post-management buyout agency, renamed ICM Partners. A rep for Rizvi declined to comment.

If Rizvi gets the price it seeks, the deal would allow it to cash out of the investment initiated in 2005, when it and Merrill Lynch invested $100 million in a recapitalization of ICM. Sources close to the situation cautioned that Rizvi’s discussions could lead to a refinancing of some debt associated with the portfolio and not an outright sale.

The portfolio has been significantly enhanced by ICM’s share of packaging fees from mega-hit sitcoms “Two and a Half Men,” “The Big Bang Theory” and “Modern Family” — shows that promise to generate tens of millions of dollars in fees for the agency for years to come.

Industry insiders say Rizvi’s move to shop the portfolio is spurred in part by its strained relations with key players at ICM Partners. Because ICM is still responsible for servicing much of the product that provides the cash flow, management of the portfolio necessitates regular interaction with agency leaders. But others close to the situation say Rizvi’s pursuit of a potential buyer is less about conflicting agendas than it is in keeping with private equity’s traditional focus on turning over investments on a seven- to 10-year time frame.

Regardless of what happens with Rizvi’s portfolio, ICM Partners will still oversee the administration of backend payments that are due to its clients, who won’t be affected if there is a sale.

To sell the portfolio outright, however, Rizvi will have to overcome some tax hurdles.

Rizvi’s ownership of the backend stakes is held in a C-Corporation — a holding entity that will require Rizvi to pay taxes of up to 40% on its gain from a sale. That, say sources, has pushed up the purchase price to a number that may be unpalatable to investors.

Rizvi has taken out nearly $140 million against its ICM portfolio through lenders including Bank of America, Merrill Lynch and UBS, though it has paid down some of that debt over time.

The intricacies of separating the old ICM’s portfolio from the new ICM Partners was one reason why the management buyout process took nearly a year to complete (Daily Variety, May 24). The key partners sought to regain control of the agency after clashing with Rizvi reps over long-term priorities for the percentery.

Rizvi, according to multiple accounts, may be looking to decrease its activities in the entertainment space. The company had invested in Summit Entertainment and saw a nice return in the wake of the distrib’s January acquisition by Lionsgate.

NewBridge Film Capital, a Rizvi subsid, has been winding down its film financing activities, sources say.