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Volume 21 No. 2
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Competitor selling for nearly $250M

Financial firm Calera buying race owner

Private equity firm Calera Capital is buying endurance sports leader Competitor Group Inc. for close to $250 million, sources said, ending a nine-month auction of the company.

The CGI management team, led by CEO Scott Dickey, will remain in place as they move from working under one private equity firm, Falconhead Capital, to another.

Calera becomes the latest such investor in the space, replacing Falconhead and joining Providence Equity Partners, which owns the Ironman Triathlon series.

“Financial investors are looking at different tailwinds — whether obesity, health and wellness, declining financing for physical education in schools, [or] health costs — and are looking at ways to get in on that wave of change,” Dickey said.

The deal was nearing completion late last week. It was expected to be finalized early this week, if not already complete.

Financial firms, including companies other than Calera, were not the only businesses that looked at buying CGI, which Falconhead bought in 2008 for an undisclosed price. AEG, Madison Square Garden Co., Lagardère Group and Tour de France operator Amaury Sport are among the strategic parties that considered the property, as did several individuals, sources said. In all, 32 entities made initial bids, a number that was scaled down to six and then to a final two, a source said.

The identity of the runner-up could not be determined.

CGI’s business is thriving, fueled by the health and wellness craze and the high-end demographics of road races. The company expects to generate revenue of $126 million and adjusted EBITDA of $25 million in 2012, representing five-year compounded annual growth of 26 percent and 39 percent, respectively, according to an executive summary sent out earlier this year by CGI’s banker, Perella Weinberg Partners.

EBITDA is earnings before interest, taxes, depreciation and amortization, a common measure of cash flow.

CGI earns its money with participant and registration fees, sponsorships, advertising, and through its publishing arm.

Calera’s David Lorsch is an endurance sports participant.
Falconhead acquired the business, best known for its Rock ’n’ Roll Marathon Series, and a group of endurance publications five years ago and quickly rebranded the new aggregate company CGI. Since then, there has been an aggressive strategy of buying and starting races, including internationally, allowing for a wide marketing platform.

When Falconhead bought the racing company in early 2008, it had 16 races. Today there are 75, making it the largest operator of endurance races in the United States. The company is based in San Diego and has 240 employees.

Calera, which is named after a type of limestone, sees further growth potential, and not just internationally.

“We see this as a rapidly growing industry, driven by some very sustainable trends,” said David Lorsch, managing director of Calera, which has $2.8 billion in assets under management. “There is an increased emphasis on healthy lives and fitness, which is driving participation rates in endurance sports.”

Lorsch, an endurance race participant himself who had planned to run CGI’s Las Vegas half marathon Sunday, also cited CGI’s growth with its magazines, its digital business and its race registration operation.

Scott O’Neil, former MSG president who sits on the board of organic food company Hain Celestial, described the trend of health and wellness as being in its first quarter. CGI, he said, represents a “pretty effective offering for a partner looking to make headway in a space that is growing like crazy.”

Jim Weber, CEO of Brooks Running Co., a major sponsor of CGI, said he is unconcerned about the shift of ownership because the management team will stay intact.

“In running, they put on the best races in the marketplace,” said Weber, whose company has a presence at about 500 races annually. “They have created a real festival atmosphere and successfully expanded it.”

For Falconhead, the deal ends its five-year run becoming the biggest player in endurance sports.

“We built this company, we founded this company, we made a very good return on it, and we are delighted it is going to a terrific new owner in Calera Capital,” said David Moross, chairman of Falconhead. “Falconhead will continue its mission of creating new companies in the world of sports and media, and we remain bullish on the industry.”

Peter Englehart, who ran CGI as CEO until Dickey took over that role but remained as chairman, stays with Falconhead.