The Deal: IMG Worldwide Asks Who's the Vainest of Them All

NEW YORK ( TheDeal) -- Mirror, mirror on the wall, who's the vainest of them all?

Tough to say, especially when assessing moguls of the sort interested in IMG Worldwide Inc. But whoever meets the $2 billion floor bid in the auction for the sports, fashion and media business that is IMG gains instant entry into vanity's hall of fame.

Not that there's a lack of candidates. Even the short list is pretty long, starting with perennial tire kickers Ron Burkle, Larry Ellison and Patrick Soon-Shiong. According to Forbes Magazine, the net worths of these Californians are, respectively, $3.1 billion, $43 billion and $8 billion.

Add to this trio such international tycoons as Mukesh Ambani of India, with his $21.5 billion, and Eike Batista of Brazil, with his $10.6 billion. IMG was shrewd enough a while back to enter into joint ventures with both men, each in his native country. So they already know IMG, and if either one wants to own all of it, he needs only to write a check. That nearly half of IMG's revenue comes from overseas gives this foreign contingent an edge not universally appreciated.

And let's not forget those moguls who are also moneyed -- just not to a Forbes 400 degree -- but whose imperfect resumes have them seeking another trip to the plate. Former Hollywood high-flyers Peter Guber and Terry Semel dominate this category, either of whom could summon sufficient private equity backing to become the public face of IMG, a role Ted Forstmann luxuriated in until his death in 2011. (Press accounts have Semel, with backing from a sovereign wealth fund, making an obviously unsuccessful run at IMG in 2008.)

But what will the winning bidder actually win? A piece of sports history, to be sure, given that IMG was founded on that handshake forever cited by sports fans around the world between lawyer-turned-agent Mark McCormack and golf legend Arnold Palmer. By the time of McCormack's death in 2003, IMG's roster was no longer limited to pro athletes but diverse enough to encompass Mikhail Gorbachev, Pope John Paul II and Kate Moss.

Forstmann, the private equity pioneer and a longtime friend of McCormack's, acquired IMG a year after its founder's death for about $700 million. It then became a Forstmann Little & Co. portfolio company, where, with the acquisition of collegiate multimedia pioneer Host Communications in 2007, IMG assumed the three-segment configuration it's in today.

In a year-end credit ratings update, Standard & Poor's defined IMG's segments as: Sports & Entertainment, which contains talent representation, sports marketing and sponsorship sales, as well as golf, tennis, broadcasting and fashion franchises focused on event ownership and management; Media, which ranks among the world's largest independent producers and distributors of sports and entertainment programming; and College, which manages and markets rights contracts to advertisers for a large network of colleges. And, in its most recent assessment, Moody's Investors Service put IMG's revenue for the year ended on March 31, 2012, at about $1.4 billion, on which the company reportedly generated Ebitda of nearly $150 million.

Those numbers, if correct, speak to margins of 11% -- margins thin enough, a Hollywood source said, to make traditional talent agencies Creative Artists Agency LLC and William Morris Endeavor Entertainment LLC seem like cash-flow geysers. It's no idle comparison, either, in that CAA and WME are assumed to be interested in IMG. Both are already invested sports, after all, and both have private equity backing. The latter, though, raises the troublesome question of whether TPG Capital and Silver Lake want their respective portfolio companies, CAA and WME, expanding in areas even less promising than their core businesses.

The same question deserves an answer from Madison Avenue's goliaths, too. This group of designated IMG suitors features the Interpublic Group of Cos., Omnicom Group Inc. and WPP plc, all of which also have sports divisions. And while their appetite for more is well known, so is their mandate as publicly traded companies to direct M&A more toward higher-margin, digitally driven businesses.

Taking a client to Wimbledon doesn't seem so important, anymore, once Google Inc. has captured a big chunk of his ad budget. And the fact that IMG is universally acknowledged to be well run -- by Mike Dolan, a former ad man, no less, who succeeded Forstmann as chairman and CEO in late 2011 -- renders implausible the rationale of acquiring the company to implement what a source called "major operating improvements."

This, in effect, takes us back to our original lineup of vanity players. So, considering how committed Forstmann Little and its 15 limited partners are to unloading their nine-year-old investment, who's it going to be? Ron, Larry, Patrick? What about Mukesh, Eike, Peter or Terry? Who's ready for his close-up?

Written by Richard Morgan in New York