To many of you, the World Triathlon Corporation (website here), a privately held company based in Tarpon Springs, Florida, is just another company better known by its acronym — WTC.  However, for those of you who participate in the sport of triathlon or even race Iroman branded triathlons (that is a 2.4 mile swim, 112 mile bike and a 26.2 mile run, consecutively), WTC is near and dear to your heart.  You see, every year WTC puts on the Ironman triathlons series (and it’s baby sister the 70.3 series), twenty-six races worldwide at last count, culminating in the World Championships in Kona, Hawaii, which enable everyone from the most seasoned endurance athlete to the everyday Joe and Jane, the opportunity to test their mettle in ways that are not so commonly available to your average weekend warrior.  I am one of those people, which is why this deal hits home for me.  Ironman is “the brand” in long distance triathlon.  Many a triathlon die hard, has inked the WTC trademark logo (the M dot above) somewhere on their body (I am not one of those people, however).

Ironman was born when U.S. Navy Commander John Collins, in an attempt to settle a score between the Mid-Pacific Road Runners and the Waikiki Swim Club, suggested that the debate should be resolved through a race combining the three existing long-distance competitions already on the island: the Waikiki Roughwater Swim (2.4 miles), the Around-Oahu Bike Race (115 miles; originally a two-day event) and the Honolulu Marathon (26.2 miles).  Collins calculated that, by shaving 3 miles off the course and riding counter-clockwise around the island, the bike leg could start at the finish of the Waikiki Rough Water and end at the Aloha Tower, the traditional start of the Honolulu Marathon.  The first Ironman Triathlon was held on February 18, 1978 in Honolulu, won Gordon Haller in a time of 11 hours, 46 minutes, and 58 seconds.

In 1979, fifty athletes joined the fray, and the first Ironwoman was crowned.   From there the sport grew by leaps and bounds, from fourteen athletes to more than fifteen hundred at Hawaii venue   In 1982, Valerie Silk moved the race to the Big Island and moved the race to its current October time slot.  The Ironman World Championship, as we know it today, was born.

Since its inception in 1978, there have been some memorable achievements and moments (which assumes  you’ve been paying attention) — the famous Julie Moss crawl to the finish (for accuracy sake the race was run twice in 1982, and this occurred during the February 1982 race), the “Ironwars” featuring Dave Scott and Mark Allen, the Luc Van Lierde record in 1996 of 8 hours, 4 minutes, and 8 seconds, Paula Newby Fraser’s 8 wins and Natascha Badmann’s 6 wins, and Tim Deboom’s kidney stone passing on the course in 2006   Countless human interest stories have also been woven into the Ironman fabric.  Races have also sprouted up in diverse locations including Lanzarota, South Africa and Malaysia.

In 1990, WTC acquired the rights to Ironman from Silk and the true business of Ironman was born.  WTC grew the sport and it’s underlying revenues by adding venues, attracting sponsorship and advertising, and licensing it’s brand to a host of product manufacturer.   In 2005, WTC launched. the 70.3 series (1.2 mile swim, 56 mile bike, 13.1 mile run) and a 70.3 Championship in Clearwater, Florida.  Additionally, the company developed a way for you to follow a race and your favorite athlete online.  WTC had taken a cottage operation and grown it into a brand, providing standardization along the way for sponsors, host communities, and competitors alike.

Providence Equity, WTC’s new owner, is a well known private equity investor headquartered in Providence, Rhode Island (shocker).  The firm became well known in the media and telecomm space, having made successful investments in Voicestream Wireless, Metro-Goldwyn-Mayer, Warner Music Group, AT&T Canada, CDW and a host of others including recent deals Clear Channel Communications and BCE, Canada’s largest communications company.   Since it’s inception in 1991, the firm has garnered $21 billion in equity commitments and invested in more than 100 companies operating in over 20 countries.  Providence Equity Partners VI, closed on $12 billion in 2007.

The relationship between Providence Equity and WTC developed over time.   Apparently, discussions have been had on and off for several years between the two entities.  Notably, a number of Providence Equity partners are endurance athletes and a board member has participated in an Ironman.   I suspect that it took time for WTC to grow to be the size of a Providence target company and ultimately it decided to bend the rules for an interesting brand that has an undermined media angle (rumors place the deal between $40 – $60 million, whereas Providence targets deals where they can put to work a minimum of $250 million in equity).

So the question now becomes how does Providence make money on its ownership stake in WTC.  As a triathlete, I can see there is still growth in the participation format, especially the 70.3 series, which is easier to take to smaller venues.  This will result in more sponsorship deals and better race day economics.  However, based on what I know about race promotion, it can be a thin margin game.  Most race directors that put on independent events do it for the love of the sport, not the money.  Even it WTC has perfected a portable process, it’s margins cannot be that much more substantial.  Raising entry fees is a possibility as demand far outstrips supply.  However, at some point there has to be a lash back, even from the faithful.  Liscencing may see some improvements through better tie-ups, but there are only so many areas where the brand truly creates sell through (Ironman branded mattresses anyone?)

My gut says they have to build the brand by broadening media coverage and capitalizing on the value of the community.  Providence is reasonably well situated to do the former, however triathlon can be a bore to watch on television, absent the extended outtakes and human interest stories;afterall we are talking about events that take place over a 4.5 – 8.5 hour time frame for the pros, depending on the distances.  Further, the majority of middle America is going to have a tough time identifying with the athletes who, save for a few notable exceptions, tend to be humble pie, better known for their run splits and pre-race meals then their media outtakes.

Expect to see value creation through tie-ups between WTC and other Providence Equity companies.   The most likely relations are with Hulu, streaming media, and potentially the Yankee Sports Network, broadcast media.

The final question is what is the available exit strategy.  Ultimately, what WTC has is niche content that appeals to a very attractive demographic.  I suspect this will be viewed as desirable to a diversified media company who wants to milk the cash cow once the risk of platform expansion is managed away and the content library has proven itself to be valuable.

The question is can triathlon become the next mixed-martial arts league, with product linkages and true devout followers who will tune in in Tour De France like numbers.  Ultimately to earn a threshold internal rate of return of 30%, WTC will need to grow 400% over 5 years.

Just because said it was cool, does not necessarily mean it will be a home run.  That’s why I’m a banker and not a PE professional.