WME and Silver Lake Announce Deal to Buy IMG

Ari Emanuel Patrick Whitesell Split - H 2013
Courtesy of WME

Ari Emanuel Patrick Whitesell Split - H 2013

The agency beat out rival bidders CVC Capital, Chernin Entertainment and a consortium of ICM Partners and the Carlyle Group.

WME and its stakeholder Silver Lake Partners have announced an agreement to acquire IMG Worldwide, a rival talent agency and marketing firm with particular depth in sports.

WME, the agency run by Ari Emanuel and Patrick Whitesell, came out on top during an auction where bids were submitted on Friday.

Bids of less than $1.8 billion came in from CVC Capital, Chernin Entertainment and a consortium of ICM Partners and the Carlyle Group, according to insiders.

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"IMG has incredible strategic value to WME. The brand's global reach, outstanding management team and leadership across sports, fashion and media are a strong complement to our business," said Emanuel and Whitesell in a statement. "We are honored to build on the legacy of founder Mark McCormack and recent owner Ted Forstmann. Supported by Silver Lake's continued partnership, WME and IMG together will deliver a broad range of opportunities and resources to the companies and talent we collectively represent."

Whitesell and Emanuel will serve as co-CEOs of the combined company.

Silver Lake managing partner Egon Durban said: "IMG is well positioned in large and expanding end markets, with significant and untapped potential for growth. We look forward to building on IMG's illustrious heritage by accelerating its existing growth plans and expanding the company's digital platform. This investment extends our successful partnership with Ari, Patrick and the WME team as the company continues its transformation into an integrated player across the new media landscape."

Terms of the transaction, including the sale price, were not disclosed, but Mubadala Development Company will be a minority investor in the deal, it was announced.

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.

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

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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.

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 Adam Sandler, 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 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.

Silver Lake and WME were advised and financed by JPMorgan, Barclays, RBC Capital Markets and Deutsche Bank Securities Inc. and advised by The Raine Group, Dean Bradley Osborne, Lazard and Simpson Thacher & Bartlett.

Morgan Stanley and Evercore handled the sale for Forstmann Little.