Well if Providence has owned them since 2008 as the article says....that is a fairly long time for a private equity firm to have something in their portfolio. So for them to flip them now....either feel like the discounted cash flows are less than what they think they can get in sale, or strategically changing focus.

Challenge Family should buy them ;)

Brand value declining with negative media from not allowing equal male/female pros to Kona. Sell.

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Talking to investment banks, and letting media know, is what venture funds do when they're looking for a trade sale exit (trade sale means selling the business to someone in a related business). They may have a buyer lined up and put it out in this way to ensure they get the best price. Unless their growth is faster than I thought, an IPO seems unlikely. Of course, if the price isn't right they may elect to not sell, but to me this sounds like a sale in the next 6-12 months.

if you search on slowtwitch (front page) you'll see an article we wrote on ironman's recapitalization last august which should help any questions about whether IM is for sale. i think it's really been for sale for the past year, year and a half, and if the article the OP referenced is actually based in fact - $50mm in EBITDA - that would be a threshold amount. it's possible. estimates have been made for earnings in that range, and now that we're nearing the end of feb, one assumes numbers for 2014 are out there in front of prospective buyers. providence will want the buyer to pay a lot more than the $220mm recapitalization. by my estimate, $270mm might get the shareholders back to square one after management fees, investment bank fees, etc.

if you want to get something like 10x, and you want the investors to make some decent money, you'll have to have earnings in that range. i hope for everybody's sake in that transactions that's where earnings are. that gives PEP a shot at getting a buyer to pay what they want to sell it for. me, i hope life time is the buyer. there would be a lot of strategic intertwining that would have to be unwound if the buyer didn't want all the handshaking with LTF. ironman and LTF have done a great job partnering with each other. i can't imagine a better buyer.

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Dan Empfield
aka Slowman

Must be true. Now a book is on amazon.

I forgot about the recapitalization, which probably transfers debt from PEP to Ironman. The sale price can be inflated by adding the debt on the assumption the new owner will pay it off, but the real sale price will be determined by the free cash flow, materially lower than the EBIT. Anywhere near 10x would mean either a bidding war with two or more buyers viewing ironman as a 'must have' purchase (seems unlikely) or the buyer having the view that profits will be substantially higher in the future. I think triathletes should be hoping for a sale to a partner with a long term interest in endurance sport and at a lower multiple than 10x which would enable to new owner to focus on modest profit growth and ensure the business model is sustainable.

i agree that 10x is a high number. when individual races get sold the multiple is much lower, like 2.5x to 5x EBITDA. that's the low to hi range from the anecdotes i've heard. nevertheless, if you look at the rate of growth in IM's earnings, and you extend that trajectory for another 2 or 3 years, you could make a case that price is 4x or 5x 2016's earnings. creative, but, there's an elegance to the argument. not that they're making that argument, i'm just armchair quarterbacking a negotiation i don't even know is happening.

as for a buyer assuming the profits would be substantially higher in the future, i'm still looking for the buyer who doesn't think he's a lot smarter than the seller, and can find substantially more profits somewhere.

but lurking in the background, like ugly wallpaper, is the sale of CGI from falconhead to calera. i don't think that earnings trajectory concept worked out very well.

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Dan Empfield
aka Slowman

Sounds like you need to raise some equity on ST and just buy out a controlling interest. Kind of like the fans owning shares in Manchester United which today has a market cap of $2.6B If fans are silly enough to buy shares of a premier league team, then certainly you can con ST posters into buying shares or Ironman :-)

http://www.nasdaq.com/symbol/manu


In the same range you have Churchill Downs with a market cap of $1.8B and Vail resorts with a $3.1B market cap.


As a business, the IM market cap would have a lot of challenges because it is hard to affect top line growth in a typical product rollout manner, in that their product is really service oriented and proportional to the head count of volunteers they can must all over the world to help them put on their events. The upside has to be on maximizing revenue out of existing events and existing lines of revenue like merchandize, sponsorships and licensing out its brand. Seems like putting on more and more races to affect top line revenue would have saturation limits if they stick to 140.6 and 70.3 events. Ideally they have a private buyer who runs it in the way that billionaires run pro sports franchises...they just want the business to be competitive and service the fans....more entertainment philanthropy than pure business. That would be the perfect buyer for IM. If it ends up public with quarterly earning and top line growth and EPS targets, not sure if that is the best in the long term for our sport.

Related to your other article, I see that Lifetime has a market cap of $2.3B. Its in the same range as Manchester United, Churchill Downs and Vail.

I was just posting on Twitter about the same thoughts. I think the worst possible option would be IPO, especially given that the primary business is really more of a service versus a product. Granted, I'd be curious whether we'd see further proliferation of IM-branded goods that would come with an IPO…I digress. It'd be an interesting exercise to see how the race experience would differ if IM were publicly owned; additionally, would we see prices rise to maintain same basic service, or would prices stay the same and they'd look to make the business more efficient? I'd personally hate to see what a "lean" IM would do for the race experience. I'm critical of WTC/IM on many things; the actual races themselves is not one of my gripes, outside of crowding issues.

I would be very surprised if it was somebody other than Life Time, unless somebody in the Corporate XC world was sitting on enough cash and were interested…maybe Jenson Button would rather own IM versus starting a cycling team?

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Editor-in-Chief, Slowtwitch.com | Twitter

I'm fairly sure the Glazers own the majority stake in Man Utd with fans owning a small amount. I believe they own 90% and fans/others own 10%. There was a movement to try and get fans to raise equity and buy the club as a cooperative but think that fell down.

Netflix has a market cap of $25billion+ and I'd say that's a service. You can IPO anything if you have cashflows to backup the valuation

Netflix IMO is more of a product. My point regarding IPO being the worst option of the bunch is that I think from a consumer standpoint, we would likely either see two strategies to increase profits: 1.) cost-cutting measures making the race experience worse, or 2.) an increase in pricing (which is likely coming anyways).

I'm still of the mindset that the pricing of Superfrog was a market test to see what the upper limits of price structure WTC (or its future owners) could pursue.

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Editor-in-Chief, Slowtwitch.com | Twitter

I'll try to ignore my OCD about Netflix and get back to the subject :)

Yeah, I think you could be right about IPO not being a good move for athletes. Alternatively the money raised from the IPO could be used to borrow yet more money to reinvest and buy up more brands and standardize more stuff across the sport (world champs, pro purse money, etc). I put that in the highly unlikely category. If Challenge bought out Ironman it would be a very interesting move for the sport

I'm in agreement with Dan that I think all of this partnering up with Life Time was really a feeling out period for an ownership transfer.

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Editor-in-Chief, Slowtwitch.com | Twitter

It isn't a 'feeling out', it is a practice corporate merger. They are setting up a co-office in Louisville, CO for the IM and LTF branded races. LTF is in agreement to buy/control all of the current IM branded short distance races. This is classic pre-merger behavior, they want management in both companies to be familiar with each other, but believe me there is already ink to paper on this one. Something drastic would have to happen to stop this train.

Do you have a source on that CO office set-up? I just hadn't seen anything on that.

I agree with you. My thought is that PEP is floating this out there to see if a couple of third-parties come out of the woodwork (more like the Middle East) and will escalate the final price, but that we're well on our way to LTF ownership.

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Editor-in-Chief, Slowtwitch.com | Twitter

I do not know if LTF is buying IM. But I do know that the LTF office is going to be in the Colorado tech center in Louisville. I know as I have seen it being built and know the people in charge. If you are looking for a job, they are hiring. Really cool people that run the show.

http://jobs.lifetimefitness.com/go/Athletic-Events-Jobs/243179/

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Jeff Abbott - @run1fast
jabbott@headsweats.com
Headsweats - Custom Team singlets $8 / Cycling Jerseys $25
Abbott Event Solutions - Brand Rep and Event Manager

I got a link thrown at me in re: LTF moving the events/endurance sports offices to CO. Very intriguing.

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Editor-in-Chief, Slowtwitch.com | Twitter

I go to the LTF in Westminster, CO, which is the closest LTF to this new office. It is quite the buzz in LTF circles and what I know comes from the employees. The Boulder Sprint and Peak are going to be Ironman run but LTF branded this year and they will totally LTF next year. It is a little awkward because the Sprint and 70.3 are on the same day, I understand they tried to change the day but couldn't because of permitting issues.

Whether a merger with LTF is a good thing for the Ironman brand...who knows. I have done two ironman branded events and one LTF branded events and I enjoyed that LTF event better. It caters to people who are a lot less serious about it (me) so I feel like the atmosphere is friendlier.

I think LTF would be an excellent post PEP owner for WTC. Outside of that, someone similar to a team owner who views it is a long-term commitment to the sport that happens to turn some profit would be next. IPO would be the worst case scenario IMO.

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Editor-in-Chief, Slowtwitch.com | Twitter

Everything is for sale.

PE company looking to exit shortly, they got their money from Dividend Recap, read article, looking at 10x EBIDTA= $500M sale. But to who? M&A activity is much higher than IPO activity over the last few years. In this case I don't think there are many companies out there looking to purchase a $50M EBIDTA company for $500M plus the debt, that are smart. So better route would to go IPO, public so much easier to deceive......

My guess also is that Triathlon in general is a declining sport, and Ironman revenues getting a little top heavy....sell it while you can.

It's America. EVERYTHING is for sale. All the time. At the "right" price. Remember "Indecent Proposal"? [:D]

The question is really what "being for sale" means to both Providence and to prospective buyers.

Dan wrote some really good articles about this. Start here: http://www.slowtwitch.com/...talization_4509.html

And read any of the associated stories.

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