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SBD Global/October 28, 2013/Marketing and Sponsorship

London-Based Chime Communications Acquires Just Marketing Int'l For $76M

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London-based Chime Communications on Friday announced a $76M acquisition of Just Marketing Int'l, the Indianapolis-based motorsports marketing agency. The deal is the largest sports-related acquisition Chime has made since creating a sports subsidiary, CSM Sports & Entertainment, in '07. JMI is CSM's first U.S.-based company and its fifth company overall. It will work alongside the sports activation and hospitality agency iLuka and sports branding agency Icon and report to CSM Chair Sebastian Coe, who chaired the London Games, and CEO Jim Glover. The deal brings an end to a sales process begun earlier this year by JMI's majority owner, Spire Capital Partners. The private equity firm sold its 50% share of the company, and the other owners -- Credit Suisse (10%), WPP (20%) and JMI CEO Zak Brown (20%) -- sold their stakes, giving CSM full control of JMI. WPP will retain an interest in JMI because it owns 20% of Chime Communications. Brown will remain JMI CEO and become group head of business development for CSM. He will work out of JMI's new London office, which opened in August.

BUILDING OFF SYNERGY: Brown said the synergies between CSM's existing agencies and JMI will help both companies increase their revenues. Brown: "It allows us to expose our clients to other sports in the family. It allows us exposure to their clients to pull into motorsports. ... They want a stronger presence in America, which is half of our business. They wanted a larger presence in motorsports, and they didn't have any before this." He added, "We've been looking at other sports for a long time, and now we're plugged into this larger group." Spire Capital, which owns the PBR, acquired a majority stake in JMI in '08. The private equity group hired Rothschild Group earlier this year to help it sell the agency. Sources familiar with Rothschild's sales book said JMI last year claimed EBITDA of $8M. The company's sales price of $76M is slightly less than a multiple of 10 times EBITDA. Bruce Hernandez, a partner at Spire and the chair of JMI's board, said, "We found a good home for the business, for the employees and Zak, and a fair transaction for the equity holders. It's not a metal-stamping business you could sell to anyone. We feel strongly there's a good cultural fit here, a good strategic fit, and a good business fit" (Tripp Mickle, SportsBusiness Daily).

GROWTH AHEAD: REUTERS reported Chime said that it planned to raise £25.6M ($41.4M) by "selling about 8.5 million new shares to financial institutions, including existing shareholders, by Oct. 30 to help pay for the deal." It is "placing the shares at 300p each," and they will represent about 9% of the company. Chime said that "it expected strong growth in operating income next year when the Winter Olympics are held in Russia, the soccer World Cup is staged in Brazil and Glasgow hosts the Commonwealth Games" (REUTERS, 10/25). In London, Rupert Steiner reported U.K. businessman Martin Sorrell's WPP "has clashed with sports marketing group Chime" over its £43M ($69.5M) acquisition of a F1 sponsorship firm. WPP "has waved the warning flag over Chime's purchase of privately owned Just Marketing." Chime "is planning to issue 8.5 million new shares." This "would have the effect of diluting WPP’s 20 per cent stake, which is understood to have aggrieved Sorrell, who also feels Chime needs to focus on its core business before expanding into niche areas." In an unusual outburst WPP "issued a statement threatening to sell its holding in Chime" (down 6.5p to 316.5p). The statement read, "Our principal concern is about the quality of the JMI deal, going to shareowners yet again to finance it, and a failure to focus on organic growth as promised. We are also considering what we should do with our investment" (DAILY MAIL, 10/26).
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