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Lagardère Sports to be rebranded and Felsing returns in H.I.G. takeover

H.I.G. Europe, an arm of the international private equity and asset management firm, has signed a definitive agreement to acquire a majority stake in the Lagardère Sports agency.

France-based media conglomerate Lagardère announced its plans at the end of last year to sell 75 per cent of the agency to H.I.G. in a deal valuing Lagardère Sports, previously one of the sports industry’s heavyweight players, at just €110m ($119m).

The takeover agreement has now been finalised with the Lagardère group retaining a 24.9-per-cent stake.

H.I.G. said that the agency will be rebranded as part of the takeover and that, following the closing of the transaction, will be led by Stefan Felsing, the experienced sports marketing executive who left Lagardère Sports two years ago.

Christian Kraul-von Renner, managing director at H.I.G., which currently has over €31bn of equity capital under management, said: “The global sports marketing segment is a multi-billion-euro industry with attractive long-term growth prospects fuelled by the continuously increasing popularity of sports and the digitisation of sports marketing services. H.I.G. is looking forward to drive the business to the next level together with a truly global management team.”

Felsing, who will become chief executive of the H.I.G.-owned sports marketing company, added: “I am looking forward to returning to a former place of work in the context of my new responsibilities. Lagardère Sports has enormous potential, particularly given the Company’s unique culture and the long-standing trusted partnership with its customers.

“Together with H.I.G., a strong and experienced investor, we are ideally positioned to continue building on these great assets. We are ready to leverage the full potential of the firm.”

The transaction remains subject to clearance by the relevant antitrust authorities.

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.

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 that has until now fallen under the Lagardère Sports and Entertainment umbrella. Lagardère Live Entertainment is valued at just over €40m.

The appointment of Felsing as chief executive represents the second time that he has returned to the company. He exited his position as Lagardère Sports’ executive vice-president of media, global sales and acquisitions at the start of 2018 as he formed his own consultancy. He was retained at the time to work on certain projects for Lagardère Sports (through his consultancy).

He was previously co-managing director at the Hamburg-based UFA Sports agency, which was acquired by Lagardère in 2015. Later that year, he was given a leading role in Lagardère Sports’ international media rights trading operation.

Felsing was also a prominent member of Sportfive’s media-rights sales team before leaving in 2008 to set up UFA Sports with former Sportfive executives Philip Cordes and Robert Müller von Vultejus.

H.I.G. is based in Miami and has US offices in New York, Boston, Chicago, Dallas, Los Angeles, San Francisco and Atlanta. It also has international affiliate offices in London, Hamburg, Madrid, Milan, Paris, Bogota, Rio de Janeiro and São Paulo.

Protracted sale process

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 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 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. will allow 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”.

However, the termination of the CAF agreement deprived 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.

Lagardère Sports and Entertainment reported nine-month revenues of €402m in November 2019, 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, 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.