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H.I.G.-bound Lagardère Sports reports €64m in full-year Ebit

Lagardère Sports, the sports arm of France-based media conglomerate Lagardère, reported €64m ($69.6m) in recurring Ebit (earnings before interest and taxes) in 2019.

The Ebit figure for the division, which is in the process of being sold to H.I.G. Europe, an arm of the international private equity and asset management firm, represents a doubling of the €32m reported in 2018.

Lagardère this month closed an agreement to sell 75 per cent of Lagardère Sports, previously one of the sports industry’s heavyweight players, to H.I.G. for €110m. The Lagardère group will retain a 24.9-per-cent stake and the sale, which is subject to clearance from competition authorities, is “targeted to close” by the end of March.

Lagardère Sports was buoyed by a favourable calendar effect in 2019, a year in which the Africa Cup of Nations, the AFC Asian Cup and the IHF World Handball Championships, three major events to which the agency sells the media rights, all took place.

However, the recent termination of the African Football Confederation (CAF) contract will deprive Lagardère Sports of the second of two contracts previously regarded as the ‘crown jewels’ of the division. The Asian Football Confederation business will end next year after DDMC Fortis won the contract from 2021 to 2028.

The erstwhile Lagardère Sports and Entertainment division generated revenues of €523m in 2019 and recurring Ebit of €66m. This figure includes revenues from the ‘Entertainment’ business that Lagardère will retain ownership of after the sale of the majority stake in its sports business. Speaking in December last year, Lagardère said that it intended to retain its entire interest in Lagardère Live Entertainment, the producer of music shows and live entertainment in France. Lagardère Live Entertainment is valued at just over €40m.

The Lagardère Sports results appeared amongst “discounted operations” in the full-year results presented by Lagardère last night. The division is now classified as “assets held for sale and associated liabilities” in the consolidated balance sheet.

Discussing working capital for the sports division, Lagardère chief financial officer Gérard Adsuar, said that the group would receive €22.5m by the end of March and a €63m AFC contribution between the end of 2020 and beginning of 2021, albeit the timing must still be negotiated with the confederation.

Overall, the group reported revenue of €7.21bn in 2019, up 5 per cent on a consolidated basis and 4.1 per cent on a like-for-like basis. Group recurring Ebit was €378m, a year-on-year drop of €7m.

Sale of Lagardère Sports

The Lagardère Sports operation will be rebranded following the takeover by H.I.G. The operation is to be led Stefan Felsing, the experienced sports marketing executive who left Lagardère Sports two years ago.

In 2006, Lagardère acquired the erstwhile Sportfive operation, then a powerhouse in European media and sponsorship rights sales, for an enterprise value of €865m. Lagardère went on to acquire the IEC in Sports and World Sport Group agencies in 2007 and 2008, respectively. Sportfive, IEC and World Sport Group were subsequently housed under the ‘Lagardère Sports’ name in a rebranding exercise undertaken in 2015.

The sale to H.I.G. brings to an end Lagardère’s lengthy search for a buyer for its sports division.

Arnaud Lagardère, general and managing partner at Lagardère, first said in February 2018 that he was “open” to a sale of the sports division. He later predicted the sale would close in the second quarter of 2019, but the process was hit by complications, including the CAF cancellation of a 12-year global media and sponsorship rights contract.

Wasserman, the sports marketing company and talent agency, and Mediapro, the Spain-based production and media rights group, were among those to have been previously interested in a purchase of the division.

Lagardère said two months ago that the €110m valuation “does not include the future value creation potential of the Group’s residual 25-per-cent interest in Lagardère Sports, or any potential gains from the Confederation of African Football agreement”.

Lagardère added: “The Group anticipates recognising a write-down estimated at between €210m and €240m, notably deriving from the unilateral cancellation of the CAF agreement.”

The sale to H.I.G. allows Lagardère to refocus its business on its Publishing and Travel Retail divisions.

Speaking in 2018 – and before CAF’s move to terminate its contract – Arnaud Lagardère described analysts’ valuations of the sports division of between €200m and €300m as “quite low” and said he aimed “to go much higher than that”.

The sports and entertainment unit finally delivered a positive Ebit in 2014 following a restructuring of operations and years of Arnaud Lagardère being accused of running the sports operation like a personal “hobby”.

A reliance on media-rights trading, previously through its Sportfive, IEC in Sports and World Sport Group agencies, was reduced as the strategy shifted to encompass sectors such as athlete and player representation, consulting and stadium management. Uefa’s centralisation of national team media rights in 2012 hit Sportfive hard, and the agency was also left chastened by the provisions for risk booked on its sale of 2014 and 2016 Olympics broadcast rights in Europe.

In 2016, Lagardère looked to North America and China as it considered the sale of a minority stake in the sports business, although no deal was ever forthcoming. The group did sell its endurance division to Wanda Group-owned Ironman in January 2016.