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Endeavor Closes UFC, WWE Merger, Creating Powerhouse Firm TKO Group

Author: Editors Desk Source: THR (The Hollywood Reporter)
September 12, 2023 at 09:26
Endeavor mogul Ari Emanuel CHRIS UNGER/ZUFFA LLC
Endeavor mogul Ari Emanuel CHRIS UNGER/ZUFFA LLC
"We're ready to fire out of the gate," says Mark Shapiro, Endeavor's president and COO, who will hold the same title at the combined company.

Endeavor Group Holdings’ mixed martial arts promotion UFC and the sports entertainment powerhouse WWE are now officially a tag team, closing a mega-combination that they had unveiled in early April. 

“We’re ready to fire out of the gate,” says Mark Shapiro, Endeavor’s president and COO, who will hold the same title at the combined company TKO Group. With the companies combined, Endeavor and its leadership team will “now have a much stronger and firmer seat at the table. But our first mission is to fully capitalize on this insatiable demand for premium content and live events.”

The new, publicly listed company, whose stock will be trading on the New York Stock Exchange, consists of two “iconic, complementary” global sports and entertainment brands, UFC and WWE, and is officially called TKO Group Holdings. Its ticker symbol TKO is also a reference to the short version of the term “technical knockout” that is used in combat sports. Endeavor owns a 51 percent controlling interest in the new company, with existing WWE shareholders owning a 49 percent interest. 

Endeavor CEO Ari Emanuel will step into the ring as the CEO of TKO, while also keeping the same title at Endeavor, which includes talent agency WME and the likes of IMG. WWE executive chairman and majority shareholder Vince McMahon serves as executive chairman of the newly created firm. Mark Shapiro is president and chief operating officer of both Endeavor and TKO. Dana White will be CEO of UFC, with WWE CEO Nick Khan pinning down the new title of president of WWE. 

Shapiro tells The Hollywood Reporter the executives have traveled frequently between the UFC’s Las Vegas headquarters and the WWE’s new HQ in Stamford, Connecticut “to communicate, ideate, collaborate. And I would say there’s very much a meeting of the minds on the opportunity that exists.”

On a combined basis, UFC and WWE hit 2022 revenue of $2.4 billion and a 10 percent annual revenue growth rate since 2019, Endeavor had previously highlighted. Since going public in 2021, it has been building out its sporting events business, mostly through UFC and to a lesser degree via PBR. Endeavor acquired UFC in 2016 for $4 billion.

The merger creating TKO will secure $50 million-$100 million in annual operating synergies, Endeavor has said, but some analysts have argued that could be conservative (“we think there’s potentially more once we get into real due diligence,” Shapiro says, noting the potential for production synergies like satellite trucks and camera equipment). The game plan is to follow the championship example set by the UFC takeover, which delivered $70 million in cost synergies. As such, it is expected that WWE will be integrated into Endeavor’s global infrastructure.

Endeavor also expects growth in domestic and international media rights for UFC and WWE that are up for renewal just as streaming platforms increasingly show interest in sports rights. It also plans to create more content, increase the number of live events, boost premium hospitality revenue, and bolster sponsorship licensing. 

“We will be wringing out cost synergies, but at the same time identifying those areas that are under-monetized or where revenue synergy significantly exists,” Shapiro says. “And that’s happening across our domestic and international media rights, our sponsorship and global partnerships, our product licensing, enhancing our live events, through ticket yield, venue fees, and premium experiences and then just overall expanding internationally, all of these businesses and doing it with a halo of the Endeavor flywheel which cannot be underestimated the influence and impact that will bring.”

As for the rights talks, Shapiro says conversations have already begin as it relates to WWE Raw and Smackdown rights, which are coming up for renewal with NBCUniversal and Fox next year.

“We’re having very encouraging conversations with several players and platforms at the moment on WWE Raw and Smackdown,” Shapiro says. “We’re cautiously optimistic, we’re, in many ways, being valued as a unicorn because we’re a year-round. WWE is a is a full calendar, sports and entertainment platform with significant engagement, strong reach and attractive demos. And that bodes well for these conversations and I believe that we’ll have results that are in line with market expectations.”

Outside the business prospects for the new behemoth, McMahon is one controversial part of the deal. The wrestling mogul returned to WWE early this year after having in June 2022 “voluntarily stepped back” from the company amid a misconduct investigation by its board. The probe focused on allegations that McMahon had sexual relationships with employees at the company and subsequently paid the women millions of dollars in severance packages, along with nondisclosure agreements. The company said in November that the investigation had concluded.

Wall Street analysts have focused on the business outlook though, touting much potential for Endeavor’s new mixed martial arts and sports entertainment titan. “With the media industry increasingly fragmenting, there is clearly scarcity value for premium IP companies,” Bank of America analyst Jessica Reif Ehrlich wrote in an Aug. 28 report. “We believe TKO reflects an opportunity to own a quasi-sports league with robust year-round programming, and an attractive financial profile that offers sizable revenue/cost savings.”

Reiterating her “buy” rating and $32 price target on Endeavor’s stock, she highlighted: “We continue to view Endeavor as a collection of highly compelling assets that each, individually, have exposure to favorable secular tailwinds within the media and entertainment industry. The announcement of share repurchases, the commencement of a dividend, continued de-levering as well as the recent IMG [Academy] sale and UFC/WWE deal are all strong signals that management is committed to driving shareholder value.”

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