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SBD Global/November 25, 2013/Finance

KKR Withdraws From IMG Bidding Process, Three Suitors Remain

KKR has withdrawn its bid to buy IMG, reducing the total number of bidders for the company to three. Sources familiar with the process said the three finalists are the Carlyle Group; a consortium led by CVC Capital Partners and former News Corp. exec Peter Chernin; and a joint bid from William Morris Endeavor (WME) and Silver Lake Partners. A spokesperson at Abernathy MacGregor, a financial PR firm working on the IMG sale, declined to comment. A KKR spokesperson also declined to comment. KKR was a finalist earlier this year in the sale for Learfield Sports, but lost out to Providence Equity. The IMG business offered another opportunity for the private equity company to jump into sports and grab a large piece of the college sports business, which IMG College dominates. It is unclear why KKR dropped its bid, but bidders often bow out of a sales process in the final round. At that point, bidders have to spend several million dollars on legal fees and due diligence, and financial sources familiar with an auction process say that bidders who do not think they can win or are not comfortable with the potential price of a company will drop out. KKR had partnered on its bid with New Mountain Capital, which was founded by former Forstmann Little partner Steven Klinsky.

NEXT STEPS: The IMG sales process is expected to continue in the coming days with individual management presentations led by the heads of various business units overseeing media, college, fashion, golf and tennis. Final and binding bids are expected to be due in mid-December. The winning bid will be selected by top execs at Forstmann Little, which bought IMG in 2004 for $750M; the trustees of Ted Forstmann's estate at the law firm Akin Gump; and the bankers working on the sale at Morgan Stanley and Evercore. IMG is expected to attract an all-cash offer of more than $2B, and reportedly has received an offer of $2.7B. The company's earnings before interest, tax, depreciation and amortization (EBITDA) increased from $146M in '11 to $175M last year, and are projected to exceed $200M this year, according to sources familiar with its financials. WME, which has former ESPN exec Mark Shapiro working with it, and CVC, which has former ESPN Chair and NFL Network CEO Steve Bornstein working with it, have long been considered the most interested bidders and most likely buyers of IMG. Both did extensive research into the company before it was even put on the market in August. More than 35 potential buyers signed non-disclosure agreements and expressed interest in the company. Bankers collected bids from that group in late September. The banks narrowed the list to 10 potential buyers in October. It cut the list to four earlier this month.
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