TPG Capital Buys 35% Interest in CAA

Investment gives agency nine-figure cash infusion for expansion, in addition to $500 million investment fund

Creative Artist Agency has sold a 35 percent minority stake to the investment firm TPG Capital,  in an unprecedented deal for a Hollywood talent agency,  the agency confirmed on Friday.

The deal from the giant private investment firm is believed to offer an infusion of hundreds of millions of dollars to CAA, and was concluded late on Thursday night.

The deal to sell 35 percent of the company also includes the establishment of a $500 million investment fund, in addition to the equity purchase. The fund would serve to pay for outside acquisitions and support further growth, particularly internationally.

CAA's partners – Bryan Lourd, Kevin Huvane, David O'Connor and Richard Lovett – all agreed to the purchase, and also agreed to sign five-year employment contracts that commits them to staying at the agency in the medium term.

(Lourd and Huvane are pictured above, O'Connor and Lovett are below right).

CAA has sought to expand in the sports market, while facing a more competitive environment from the new powerhouse in town, WME. That, combined with depressed prices for movie talent and fewer productions being made made all around, has made the agency game a more difficult one. 

CAA launched their athletic division in 2006, and has continued to make incursions into that market. The agency absorbed the SFX Football division in July 2006, making it a leading presence in the sports world. Among others, the agency represents Derek Jeter, Shaun White, Novak Djokovic, and Cristiano Ronaldo, and the New York Yankees.

Those moves have been expensive gambles, however, and have largely been funded by CAA itself. The company has shelled out millions of dollars to recruit top talent such as IMG's Tom Condon and Ken Kremer to head up their operations.

Friday's announcement gives the agency a massive cash injection, and the CAA partners have committed to sharing cash from the investment with every employee at the agency. "Every secretary, every agent, every person who works in the kitchen, every valet will get a check," said one person involved in the deal.

TPG (formerly Texas Pacific Group)  is one of the largest private equity firms in the planet, controlling some $47 billion in capital. The deal was led by the firm's

James Coulter and David Bonderman.

But TPG's ventures into Hollywood have not been entirely happy ones. In 2004, it was one of the lead investors in a leveraged $4.8 billion buyout of MGM. That move stuck the consortium of investors with an $875 million equity loss.

"We look forward to supporting CAA at this exciting inflection point in their evolution as they look to expand their operations and services around the globe," said TPG founding partner Bonderman in a statement.

CAA's managing partners issued this statement: "Our new relationship with TPG will help us continue to build momentum in the work we do for clients every day.  With TPG’s experience and resources, this could be accomplished through capital investments that build upon our full-service platform, new business leads developed through TPG’s extensive worldwide relationships, expert insight on the international marketplace, and a myriad of other ways.”

The agency released this full press release at 12:45 pm:

LOS ANGELES (October 1, 2010) – Creative Artists Agency (CAA), the world’s leading entertainment and sports agency, announced today that it has formed a strategic partnership with global private investment firm TPG Capital. TPG has invested an undisclosed sum for a non-controlling 35% interest in the agency.

Additionally, CAA and TPG have committed to create a $500 million pledge fund, providing access to significant capital for future investments. TPG has more than $47 billion under management.

“CAA is the clear leader within its industry and the talent agency most trusted by successful actors, directors, writers, producers, musicians and athletes,” said David Bonderman, TPG Founding Partner. “Over its history, the company has demonstrated a consistent ability to identify nascent opportunities and expand into new markets. CAA’s outstanding management team has built the gold-standard franchise in their industry based on a culture of exceptional client service, and we look forward to supporting CAA at this exciting inflection point in their evolution as they look to expand their operations and services around the globe.”

In a statement, the CAA Managing Partners said, “CAA exists for one reason – our clients. Our new relationship with TPG will help us continue to build momentum in the work we do for clients every day. With TPG’s experience and resources, this could be accomplished through capital investments that build upon our full-service platform, new business leads developed through TPG’s extensive worldwide relationships, expert insight on the international marketplace, and a myriad of other ways.”

The managing partners have made long-term commitments to continue leading the agency.

CAA President Richard Lovett added, “We have known and respected the leaders of TPG for a long time, and believe this strategic partnership marks a new starting point for the agency’s future.”

In recent years, anticipating the significant technological and market changes that have impacted the entertainment and media industries, CAA strategically expanded into complementary new businesses and added extensive resources to deepen its unique, 360-degree approach to servicing clients. As a result, CAA has developed profitable new divisions while continuing to expand the role of talent representation.

CAA entered the sports business in 2006 and within two years was recognized by leading industry trade publication Sports Business Journal as “the dominant sports agency in the United States.” Today, it represents more than 650 of the world’s most important athletes, coaches, broadcasters, teams, leagues, venues and marketers, from Derek Jeter, Shaun White, Novak Djokovic, and Cristiano Ronaldo, to the New York Yankees, Chelsea FC, and the NCAA’s Pacific-10 Conference. CAA Sports won the highly-coveted assignments to sell major, multi-year corporate partnerships for the new Yankee Stadium and the soon-to-be renovated Madison Square Garden, and has since closed nearly 20 such deals.

In 2008, in partnership with the former team from Merrill Lynch’s Media and Sports Structured Finance Group, CAA created an investment bank that has since raised or advised on more than $2 billion in media and sports transactions. The bank, Evolution Media Capital (EMC), has been at the center of many significant deals, from capital raising and structuring, to broadcast rights negotiations and stadium financing, to mergers and acquisitions. Among many other transactions, it represented the successful buyers of Major League Baseball’s Texas Rangers; structured Sony ATV’s $300 million of debt financing for its 50% ownership of the Beatles library; advised on the establishment of animation film studio Illumination, which recently released the film “Despicable Me,” earning $344 million at the box office to date; raised and structured the debt for a $245 million film fund for Participant Productions; raised $100 million for a National Geographic film fund; and conducted the sale of Authentic Entertainment, a CAA client and leading television production company, to media entity Endemol.

The agency also has grown internationally, with a presence around the world, including offices in London and China, where CAA represents the top entertainment talent in one of the world’s fastest growing economies. CAA developed a digital media practice that creates new opportunities for clients within this emerging marketplace, represents technology companies like Cisco and IMAX, and incubates Internet companies, including FunnyOrDie.com, the leading destination for comedy on the web, with more than 24 million video views per month. CAA Marketing serves clients such as Coca-Cola, Dell, and Mattel, and CAA Games represents the world’s top game designers with total sales exceeding $8 billion.

Lazard Freres & Co., LLC and Rothschild Inc. served as financial advisors to CAA. Wachtell, Lipton, Rosen & Katz served as legal counsel to CAA. Credit Suisse was financial advisor to TPG. Cleary Gottlieb Steen & Hamilton LLP and Loeb & Loeb served as legal counsel to TPG.