The owners of VeloNews have entered into an agreement for the sale of the magazine, its website and parent company, Inside Communications Inc., to Competitor Group Inc., a recently formed private equity-financed media company based in San Diego, California.
The deal, announced to staff on Friday, is intended to add needed financial clout to VeloNews and other ICI divisions, including VeloPress, VeloGear, VeloSwap and Inside Triathlon magazine.
Inside Communications CEO Felix Magowan said the decision was driven largely by the realization that the company was “too undercapitalized to take advantage of all the growth opportunities available to us on the web, in print, books, events and mail order.”
Magowan said the offer by CGI was one of several he and other shareholders had been considering in recent months.
“What really put this deal over the top was the involvement of Peter Englehart, a man I’ve known and respected for years,” Magowan said.
The new owners said Friday that the magazine and other ICI divisions will continue to be based in Colorado.
“We are not interested in tampering with what has made the company successful,” Englehart told ICI employees. “We want to build on what you’ve already accomplished. Shifting the base of operations of a well-established company with a lot of talent would not make sense.”
Englehart is the former senior vice president of programming and production and cofounder of the Outdoor Life Network (now Versus) as well as the person best-known for launching ESPN 2. At OLN, Englehart was a driving force behind bringing live coverage of the Tour de France to American television.
“I’ve known Peter since 1995,” said Magowan, “and we’ve worked well together on several projects, including race programs, television shows and an internet syndication deal. He has a solid relationship with people at Amaury Sport Organization (the parent company of the Tour de France) and knows the sport and its players. His involvement is really why we hadn’t considered offers from much larger companies.”
The original Velo-news was founded in 1972 by Barbara and Robert George in Brattleboro, Vermont. Already well-positioned as the bible of bicycle racing, the title was acquired in 1988 by Inside Communications and moved to Boulder.
There, the title was updated and modernized and grew rapidly to become the world’s largest competitive cycling title. In 1993 ICI launched VeloNews.com and became the first to offer live up-to-the-minute coverage of the Tour de France. The company was also quick to take its mail-order catalog, VeloGear, online, and eventually grew its internet-based revenue to some 20 percent of overall company revenues — a ratio well ahead of other traditional media companies.
“It’s been a successful company, and just like the Georges, we did some remarkable things with relatively few resources,” Magowan said. “In a way, this sale is driven by the same forces that prompted the sale of the original Velo-news to John (Wilcockson) and me. We were able to bring the magazine up to another level. Now, it’s time for the company to move beyond what we’ve done and for that we needed an infusion of capital.”
Magowan said recent developments in web-based media prompted him to consider several unsolicited offers to buy the company.
“It really started in the spring of last year,” he said. “We were surprised, for example, when CricInfo.com was sold to ESPN for $100 million.”
“Here we were doing $1 million in advertising on the web and thinking we were doing just fine, and along comes ESPN, paying 100 times that for a site in a sport that arguably has a smaller world-wide footprint than cycling,” said Magowan. “It was a real wake-up call. It made us realize we were under-capitalized and needed an outside partner so that we could take advantage of the huge growth on the web.”
Magowan said that the recent sales of cyclingnews.com and cycling.tv soon also triggered interest in ICI.
“Unlike a lot of companies, we have a complete media package, with both magazines, their web sites, books, events and a strong catalogue business,” Magowan said. “We had some very interesting offers, but it wasn’t something that we were willing to hand off to someone who didn’t really understand the sport.
“Simply put, Peter gets it,” he added. “He appreciates where VeloNews is now, but also recognizes that by creatively leveraging his financial resources, contacts such as the Tour de France, and large national advertisers that he can significantly grow the franchise. I sure couldn’t do that on my own, so why stand in the way of progress? I truly think VeloNews under Peter will be much larger, have a greater impact and, above all, help grow the sport for all of us.”
In early January CGI bought Elite Racing, the U.S.’s largest running race promoter, Triathlete magazine, and Competitor, Inc. owner of regional sports magazines and the Muddy Buddy event series. The new owners plan to continue publication of both Inside Triathlon and Triathlete re-positioning the former as an up-market, “elite” companion to the latter.
Like most ICI employees, VeloNews editor in chief Ben Delaney learned of the deal only last week.
“This deal should mean nothing but good things for our readers,” Delaney said.
The CGI-ICI deal is expected to close in 30 days and is subject to customary closing conditions. CGI is financed by Falconhead Capital, a $500 million New York-based private equity group that invests in the sport, leisure, lifestyle, and media categories. In addition to Competitor Group, Inc., Falconhead Capital’s current portfolio investments include Extreme Fitness, Inc., Our365 (f/k/a Growing Family), Escort, Inc., and Premier, Inc. Past Falconhead portfolio investments including, among others, National Powersport Auctions, Maritime Telecommunications Network, The Golf Warehouse and ESPN Classic Europe, LLC.