Business

WME agency in a gamble on IMG for $2.3B

William Morris Endeavor’s boss Ari Emanuel better like debt.

The Hollywood superagent certainly piled on a lot of it Wednesday when WME and its partner, Silver Lake Partners, agreed to buy IMG Worldwide for a pricey $2.3 billion.

That’s about $500 million more than next-highest bid.

For Emanuel — who boldly broke away from agency powerhouse ICM in 1995 to form Endeavor and then took over the legendary William Morris Agency 14 years later — it’s a gamble that he can revive cash-starved IMG and turn it once again into a fast-growing global sports and entertainment powerhouse.

The deal to acquire Forstmann Little & Co.’s IMG melds one of Hollywood’s most influential agencies, with a focus on TV, movies, books and music, with IMG’s fashion and sports business.

IMG’s Victor Cruz and Peyton Manning come together with WME stars such as Taylor Swift and Mark Wahlberg.

While sports assets across the board have risen in value, the high level of debt is raising red flags with some critics.

“They are taking a huge gamble,” said one source. “Either it’s the most brilliant thing or they end up being Time Warner-AOL.”

Another, more skeptical, source noted: “45 percent of this business is selling college sweatshirts. IMG is a nice to have but not a must-have.”

“I’m curious how this is structured: Are they going to run it separately or will it be merged?” this person asked.

Indeed, co-CEOs Emanuel and Patrick Whitesell will be paying a premium price for a company with 2013 Ebitda of $180 million and debt of $750 million.

For the new owners, growing the pie and finding synergies will be key.

S&P on Wednesday put IMG’s credit rating on a CreditWatch with “negative implications.”

WME and IMG have some 4,500 employees combined. When William Morris merged with

Endeavor, in April 2009, joint revenue was reportedly $325 million.

IMG needs significant investment to expand its business, the major piece is its college-sports division, sources said.

IMG’s cash balance is down to $97 million from $197 million in March 2012, Forbes reported.

In addition to debt, Emanuel has to be wary of possible defections, industry insiders said.

Rivals are already hoping to pick off clients and agents of both companies who don’t like the new mix, The Post has learned.

Some have a particular eye on college sports world and predict senior management will exit.

Time will tell, and Emanuel is said to be keenly interested in why some key IMG talent bolted in recent months.

In fact, some Hollywood insiders are wondering how long it will take Emanuel to try to win back some of the recent ex-IMG stars, like Roger Federer.

Some executives close to the IMG deal are speculating that Silver Lake green-lighted the premium price as a way to ultimately exit WME.

At a time when lower production costs make organic growth in a people business harder to come by, growing through acquisition could put it in place to go public and exit, sources said.