Lagardère Sports valued at €110m in proposed H.I.G. Capital takeover

Lagardère, the France-based media conglomerate, has announced plans to sell 75 per cent of the Lagardère Sports agency to H.I.G. Capital, the Miami-based private equity and asset management firm.

The sale, which is targeted to close before the end of the first quarter of 2020, would bring to an end Lagardère’s protracted search for a buyer for its sports division.

Lagardère said today (Monday) that it has received an offer from H.I.G. Capital and that the planned disposal would value Lagardère Sports at approximately €110 million.

The group intends to retain its entire interest in Lagardère Live Entertainment, the producer of music shows and live entertainment in France that has until now fallen under the Lagardère Sports and Entertainment umbrella. Lagardère Live Entertainment is valued at just over €40 million.

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 has been hit by complications, including the Confederation of African Football’s (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 that the €110 million 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 €210 million and €240 million, notably deriving from the unilateral cancellation of the CAF agreement.”

The planned disposal, which will allow Lagardère to refocus its business on its Publishing and Travel Retail divisions, is to be submitted to the relevant employee representative bodies and is subject to clearance from the competition authorities.

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

The termination of the CAF agreement would 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.

On Friday, the International Chamber of Commerce rejected Lagardère Sports’ application for emergency measures in the CAF dispute.

Following last month’s announcement of CAF’s “unilateral decision” to cancel the contract, the Lagardère group’s market capitalisation – the total value of the company’s shares of stock – lost between €160m and €170m in value, according to Arnaud Lagardère. He also forecast that the average recurring Ebit (earnings before interest and taxes) from the CAF contract would be around €10m per year for the 2020 to 2028 period.

Lagardère Sports and Entertainment recently reported nine-month revenue of €402m, a 32.3-per-cent year-on-year jump on a consolidated basis and largely thanks to the favourable calendar effect. Events such as the Africa Cup of Nations, AFC Asian Cup and IHF World Men’s Handball Championship all contributed significant revenues during the period.

In 2018, the sports and entertainment division reported recurring Ebit of €30m and revenues of €438m.

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 (which later fell under the Lagardère Sports umbrella), was reduced as the strategy shifted to encompass sectors such as athlete and player representation, consulting and stadium management.

Lagardère looked to North America and China in 2016 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.