CAA sells 35% stake to TPG Capital

Deal expected to help talent agency build its sports business

CAA has sold a 35% equity stake to private investment firm TPG Capital in a transaction expected to help the powerhouse talent agency further build its sports business and monetize the stakes of the partners who own and run the business.

TPG has invested an undisclosed sum for the stake, which does not include any control over the agency. In addition, TPG will create a $500 million fund for future investments, the agency announced Friday.

As part of the deal, founding partners Bryan Lourd, Richard Lovett, Kevin Huvane and David O'Connor have signed new five-year contracts.

"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," CAA president Lovett said in a statement.

"CAA is the clear leader within its industry and the talent agency most trusted by successful actors, directors, writers, producers, musicians and athletes," TPG founding partner David Bonderman said. "Over its history, the company has demonstrated a consistent ability to identify nascent opportunities and expand into new markets. CAA's outstanding management team has built the gold-standard franchise in their industry based on a culture of exceptional client service, and we look forward to supporting CAA at this exciting inflection point in their evolution as they look to expand their operations and services around the globe."

"CAA exists for one reason -- our clients," the CAA partners said. "Our new relationship with TPG will help us continue to build momentum in the work we do for clients every day. With TPG's experience and resources, this could be accomplished 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."

Known for representing the likes of George Clooney, Brad Pitt, Sandra Bullock, Julia Roberts, Steven Spielberg and David Letterman, the agency made a major move into sports more than four years ago when it brought on established agents like Tom Condon and Ken Kremer.

CAA now represents such sports stars as Peyton Manning, Carmelo Anthony, LeBron James, Derek Jeter, Tony Romo, David Beckham and Christiano Ronaldo. The agency also hired James' lawyer and agent Leon Rose and acquired his business.

Sports represents a growth area at a time when Hollywood is making fewer movies, DVD revenue is down and it is more difficult to get TV series package deals in a fragmented market because of competition and network resistance.

This investment is expected to facilitate a move by CAA into producing and selling sports programming as well as representing athletes. That would follow the model of IMG, the agency run by Theodore Forstmann that does both programming and provides talent representation.

CAA has been known to have held talks with potential investors, especially private equity firms, since at least earlier this year. At first it appeared the agency just wanted an investor in the sports area, but that has now broadened into an equity investment.

Besides sports programming, the money will go to the key partners and is expected to be shared with others across the agency, with payments depending on seniority and status.

Lazard Freres & Co., LLC and Rothschild Inc. served as financial advisors to CAA. Wachtell, Lipton, Rosen & Katz served as legal counsel to CAA. Credit Suisse was financial advisor to TPG. Cleary Gottlieb Steen & Hamilton LLP and Loeb & Loeb served as legal counsel to TPG.

The CAA partners were known as the young Turks when they acquired the agency in 1995 from founders Mike Ovitz and Ron Meyer, but now have become the senior talent reps in Hollywood.

In June during the Financial Times' Business of Luxury Summit in Beverly Hills, Lourd said CAA was meeting with potential investors whom he declined to name. However, published reports had said the talks were with TPG and New York investor Kohlberg Kravis Roberts.

CAA has already invested in Evolution Media Capital, which former Merrill Lynch bankers Robert Stanley, Patrick Lampe and David Pagoda formed about two years ago to do sports and movie deals.

TPG Capital, formerly known as the Texas Pacific Group, is based in San Francisco with offices worldwide. It manages investment funds that specialize in growth industries, provides venture capital and does debt investments. It was founded in 1992 by Bonderman, James Coulter and William Price III, who had previously worked with the Bass family of Texas. Previous investments in show business include participation in groups that acquired Univision and MGM.