Chase and IMG Plan $200 Million Sports Fund

Chase Capital Partners (CCP) is joining forces with sports marketing specialist International Management Group (IMG) to launch a ground-breaking private equity fund for the worldwide sports market. The partners believe the IMG/Chase Sports Capital Fund is the only international private equity vehicle in existence dedicated the sports market.

David S. Moross of Whitehall Financial, who has acted as consultant and investment strategist to IMG over the past eight years, has been appointed managing partner of the new fund.

IMG is the world’s largest sports, leisure and lifestyle marketing company. Its individual clients include Arnold Palmer, Tiger Woods, Andre Agassi, Pete Sampras, Wayne Gretzky and Kristy Yamaguchi. Organisations on its client list include Major League Baseball, Wimbledon, the Federation International de Ski and the Royal and Ancient Golf Club of St Andrews.

CCP, IMG and Whitehall have together committed $100 million to the IMG/Chase Sports Capital Fund in an undisclosed ratio, taking the vehicle half way to its $200 million (ecu 182 million) target. External marketing for the fund will begin in April, and the partners hope to hold a final close before the end of the calendar year.

The fund aims to capitalise on the explosive growth in worldwide sports-related markets, including broadcast and media properties, franchises and sports products.

Jonathan Lynch of CCP said the private equity group and IMG had been discussing the idea for some time. The decision to launch the fund now “reflects the confluence of a strong fundraising market and the potential to leverage on a very attractive sports industry, which has never been more dominant”, Jonathan Lynch said.

The fund will invest in sports-related opportunities, including franchises, equipment and media properties, on a global basis. The vehicle will not invest in sports properties that could present IMG with a potential conflict of interest. The vehicle is therefore likely to exclude certain sectors, such as Major League franchises, where IMG is particularly strong.

However, the partners expect a substantial proportion of the fund’s franchise-related investments will be made outside the US. “The unexploited potential of sports franchising in the Far East is tremendous, and increasing numbers of opportunities are also emerging in Europe and Latin America”, commented Jonathan Lynch.

Although the IMG/Chase Sports Capital Fund will concentrate primarily on established businesses, its remit does not exclude investment in firms at an earlier stage of development. Its investment size will also vary widely, Jonathan Lynch explained, saying that small franchises might require $3-5 million of equity funding, compared with possible investments of $20-25 million into larger franchises. The vehicle will also have the ability to undertake significantly larger transactions. CCP, which invariably seeks co-investment opportunities through its alliances and joint ventures, is particularly interested in co-investing in larger sports properties and higher-ticket-value deals, according to Jonathan Lynch. Other LPs will also have the opportunity to co-invest with the sports fund.

The fund’s investor line-up is likely to comprise individuals and family investment groups alongside institutional fund managers with existing connections with CCP, IMG and Whitehall. Jonathan Lynch said that a number of institutions with which CCP invests in deals will be offered the opportunity to participate, as will private clients of Chase Manhattan. However, the partners expect the fund to draw fairly evenly on sources in the UK, Continental Europe and the Far East, as well as in the US.

CCP said the fund will be structured as a standard LP, with its domicile to be decided in line with investors’ preferences.