IMG Bidders Said to Argue for Lower Price Amid Debate on ProfitJodi Xu and David Welch
Private-equity firms bidding for Forstmann Little & Co.’s talent agency IMG Worldwide Inc. are disagreeing with the earnings projection Forstmann has provided for this year, a week before final bids are due, three people with knowledge of the matter said.
The questions regarding IMG’s profitability have created a gap of as much as $500 million between what the three remaining bidders -- Carlyle Group LP, Silver Lake Management LLC and CVC Capital Partners Ltd. -- are willing to pay and what Forstmann Little is seeking, said the people, who asked not to be identified because the information is private. Forstmann is seeking as much as $2.5 billion, two of the people said.
At the start of the auction, Forstmann Little told bidders that IMG would earn $200 million in earnings before interest, taxes, depreciation and amortization this year, people familiar with the situation have said. Bidders are questioning that figure because of some accounting changes and one-time adjustments, the people familiar with the earnings dispute said. The final deadline for bids is Dec. 13, the people said.
Bidders have argued that the company’s Ebitda should be reduced by $19 million because of adjustments to earnings in four overseas joint ventures, people familiar with the process have said. In addition, IMG changed some accounting treatment of certain payments made by its college brand licensing business and has some other non-recurring items that boosted earnings, the people familiar with the earnings dispute said.
Accounting for those adjustments, IMG’s Ebitda is probably closer to $150 million, one of the people said. This would imply a purchase price of about $2 billion, based on a multiple of about 13 times, the person said. Still, a bidding war could push the price higher, two of the people said.
KKR & Co. dropped out of the bidding process last month, one person said. Representatives for Forstmann, CVC, Carlyle, Silver Lake and KKR declined to comment on the sale process.
The remaining bidders for IMG own similar companies that could be combined to create synergies after a merger. Silver Lake, based in Menlo Park, California, owns talent agency William Morris Endeavor Entertainment LLC; London-based CVC owns the Formula One car-racing series; and Washington-based Carlyle’s bidding partner ICM Partners represents actors such as Jodie Foster and Al Pacino.
IMG, based in New York, represents National Football League quarterback Peyton Manning and model Gisele Bundchen, among others.