WWE Slumps After Announcing $21-Billion Merger Deal With UFC Parent Endeavor

Vince McMahon’s World Wrestling Entertainment (NYSE: WWE) and Ari Emanuel’s Endeavor Group (NYSE: EDR), the parent company of UFC, announced a partnership to form a new global sports and entertainment organization that will combine the UFC and wrestling.

The company dipped more than 10% in pre-market trading following the news. When the merger is completed, the new business will be worth approximately $21 billion and will generate approximately $50 million to $100 million in cost synergies.

The deal will see Endeavor own 51% of the new combat sports and entertainment company, while WWE shareholders will own 49%. The combined UFC-WWE corporation will be listed on the New York Stock Exchange as “TKO.”

Both companies stated in a joint statement that they produced $2.4 billion in revenue last year, growing revenues at a 10% annual rate since 2019.

“Given the incredible work that Ari and Endeavor have done to grow the UFC brand – nearly doubling its revenue over the past seven years – and the immense success we’ve already had in partnering with their team on a number of ventures, I believe that this is without a doubt the best outcome for our shareholders and other stakeholders,” McMahon added.

The transaction values WWE at approximately $106 per share, giving the sports entertainment conglomerate an enterprise value of $9.3 billion.

Emanuel will serve as CEO of both Endeavor and the new entity. McMahon will serve as executive chairman, while Endeavor CEO Mark Shapiro will serve as the President and COO. Dana White will continue to lead the UFC, while WWE CEO Nick Khan will lead the wrestling company.

The new firm will have an 11-member board of directors, with six from Endeavor and five representing WWE.

Emanuel is also well-known for his friendship with Elon Musk. Variety reported that he led the company’s minor investment in Twitter just a few months after it was acquired by Musk.

Prior to Musk’s takeover of Twitter, Emanuel reportedly became engaged in a debate between the board of directors of Twitter and Musk over the latter’s attempt to cancel the deal. Emanuel had contacted Twitter board member Egon Durban to offer that the social network collaborate with Musk to “find a solution” to their legal dispute ahead of a trial planned to begin in October.

Durban, co-CEO of tech investment firm Silver Lake, presently serves on Endeavor’s board of directors, while Musk served on Endeavor’s board before departing in March 2022.

The news comes the same weekend that WWE conducts its marquee live event, WrestleMania, in California. The company has been looking for a buyer for several months. McMahon returned to the company in January as chairman to oversee the process. WWE stock has risen more than 33% this year, valuing the company at more than $6.79 billion.

The agreement basically puts an end to WWE’s decades-long status as a family-run enterprise. McMahon’s father started WWE in its original form in the mid-twentieth century, and McMahon is the company’s main stakeholder. In 1982, McMahon purchased the company from his father.

McMahon left the company in July after a series of revelations that he paid many women millions of dollars to remain quiet about alleged romances and wrongdoing. Stephanie McMahon, his daughter, joined Khan as co-CEO. Vince McMahon’s creative powers were taken over by Paul Levesque, Stephanie McMahon’s husband and the wrestler known as Triple H.

When Vince McMahon returned in January, Stephanie McMahon stepped down and Khan took over as CEO fully. According to a securities filing, the elder McMahon recently signed a two-year job deal.

WWE delivers a thriving media and live events industry, as well as decades of intellectual property. Last year, the company earned $1.29 billion in revenue, primarily from its $1 billion media division.

Also, alongside efforts to widen revenue sources, WWE is reportedly in talks with regulators in Colorado and Michigan to legalize gambling on certain high-profile events of its marquee matches. The promotion, which primarily operates scripted professional wrestling matches, has also reportedly tapped accounting firm Ernst & Young for the safe keeping of match results to ensure that they do not leak to the public.

WWE content is critical to Fox Corp.’s Fox Broadcasting network, as well as NBCUniversal’s USA Network cable channel and Peacock streaming service. Peacock agreed to a five-year, $1 billion contract with WWE to be it’s streaming home in 2021.

WWE’s contracts with Fox and USA are set to expire next year.

ESPN, a division of Walt Disney Inc., carries UFC content under a five-year agreement worth $1.5 billion, according to the Journal. Pay-per-view UFC events are also available on ESPN.

WWE last traded at $91.26 on the NYSE.

Information for this briefing was found via CNBC, The Wall Street Journal, Variety, Seeking Alpha, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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