WME Nears Deal for Sports and Talent Powerhouse IMG

The acquisition would create an agency goliath and boost WME's sports and international footprint.

Sports and talent powerhouse IMG is nearing a sale to William Morris Endeavor and Silver Lake Partners, a deal that would create a massive entity with enough star power to redraw the business landscape in Hollywood.

Sources say WME and Silver Lake are negotiating exclusively with IMG owner Forstmann Little. WME beat out at least two other bidders, including a consortium with CVC Capital and Chernin Entertainment and a partnership of Carlyle Group and ICM Partners. Both of those bidders reportedly wanted the asset for no more than $2 billion. The sale price is not known.

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IMG is considered a plum asset because it is reportedly expected to earn in the neighborhood of $175 million this year, not including earnings, interest, depreciation and amortization. Both a talent agency and producer, IMG represents the likes of Peyton Manning, Taylor Swift and Justin Timberlake. It makes sports programming, has a brand-consulting group and handles marketing and ticketing for 200 collegiate sports properties. Its worldwide assets include a joint venture that promotes the All-India Football Federation.

A list of sports programming IMG produces, created or has produced in the past includes shows like, The NFL Cheerleader Playoffs, Battle of the Network Stars, American Gladiators, the Skins Game, World's Strongest Man and Super Bowl's Greatest Commercials.

Forstmann Little acquired IMG in 2004 for about $700 million and is selling it in order to pay off some of the private equity firm’s limited partners, including some pension funds for General Electric. A year ago, Forstmann Little had hoped to get as much as $3 billion for IMG, according to insiders, but more recently it lowered its expectations to $2.5 billion. Bids dipped below that after potential suitors dug through the company’s financial reports.

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WME is run by co-CEOs Ari Emanuel and Patrick Whitesell. Silver Lake, a tech-heavy private equity firm, is a stakeholder in WME.

While it has been known for a year that IMG would eventually be sold, the auction process began in the summer, and observers expected WME to bid aggressively for the firm, which will help it expand its sports business and carve out a larger international role. Plus, IMG’s list of talent will boost an already impressive lineup at WME, which represents the likes of Christopher Nolan, Lady Gaga, Oprah Winfrey and Seth MacFarlane.

Observers also have speculated that WME and Silver Lake were anxious to acquire IMG in order to diversify WME into something akin to a smallish media conglomerate, rather than simply a large talent agency, with the plan to eventually take the combined entity public.

In fact, at one point talent agency CAA and investment firm Colony Capital were considering a bid for IMG, though some top executives at CAA reportedly balked at the prospect of an acquisition that could radically diversify its business.

As for sports, WME represents clients for their off-the-field activities while IMG represents some on the field and some off, making the combined entity a potential one-stop shop for sports stars.

IMG was created by Mark McCormack and golfer Arnold Palmer in 1960. Forstmann Little purchased it a year after McCormack died in 2003, and then Forstmann Little founder Theodore Forstmann died in 2011, convincing some investors that the time was right to unload IMG for a 200-plus percent profit.

Morgan Stanley and Evercore are handling the sale for Forstmann Little.

WME, IMG, Forstmann Little and Silver Lake all declined to comment.