ProElite Purchased for $2 million

October 26, 2009

Stratus Media Group, Inc. has announced that it has reached an agreement to acquire a 95% stake in ProElite, Inc. for $2 million.

Stratus Media Group, Inc. (OTCBB: SMDI ), a live entertainment company, announced today that it has entered into an agreement to acquire a 95% interest in ProElite, Inc. (PK: PELE), a sports, entertainment and media company that has produced arena-based mixed martial arts (MMA) events.

 
Prior to the sale of significant revenue-generating assets, ProElite recorded $13.5 million in MMA event and television revenues during the 18 months ended June 2008. ProElite has engaged in an extensive restructuring that included the sales of these revenue-generating assets for cash and a share of future revenues, significant expense reductions, the elimination of $12 million of direct and contingent liabilities and the shedding of unprofitable subsidiaries.

 

“ProElite, a globally recognized brand, is a great addition to our portfolio of companies and live entertainment events and provides an experienced management team with demonstrated success in operating MMA events and generating broadcast revenues,” stated Paul Feller, President of Stratus. “By combining ProElite with sufficient capital and Stratus’ strengths in event production and sponsorship sales, we intend to re-establish ProElite as a leading international MMA company.”

 

Stratus will purchase Series A Preferred Stock of ProElite, convertible into 95% of the outstanding Common Stock of ProElite, for $2,000,000. The acquisition will be closed when certain conditions have been met, which the company expects will occur within the upcoming weeks. Upon closing, all of the current directors of ProElite will resign and the board of directors of ProElite will consist of Paul Feller and Glenn Golenberg, both current members of Stratus’ board of directors, and a third director to be announced. Paul Feller, Stratus’ Chief Executive Officer, will become ProElite’s Chief Executive Officer. Certain present and former key ProElite executives will continue employment with ProElite or will enter into employment agreements with Stratus.

Payout Perspective:

The purchase is a little surprising, because there’s not much left to ProElite other than some brand recognition in the name and certain elements of the former management team.

The acquisition certainly begs a number of questions:

  • Without the revenue-generating assets that essentially made ProElite/EliteXC, is the company really worth paying $2 million dollars for?
  • One could quite fairly question whether ProElite’s experienced management team is really the right group to lead an MMA company to profitability.
  • Lastly, what does Stratus know about MMA, and how can they make a difference to ProElite? Stratus has yet to turn a profit since they recommenced operations in 2006 off of a 5-year hiatus (the company only made $40k in revenue last year). Not surprisingly, they’ve also got substantially negative cashflows from operations – nearly $500,000 in the first six months of 2009. They’re a company planning to host a series of vintage car shows in the future; that’s hardly the same expertise needed to target, attract, and cater to the MMA demographic.

4 Responses to “ProElite Purchased for $2 million”

  1. mma guru on October 26th, 2009 8:24 AM

    yeah, this is a bit odd.

  2. MMA-WD on October 26th, 2009 11:33 AM

    It actually seems to align well with the rest of their business and business model being a Pro Sport & Entertainment Company.

    As for experience in the Industry, one should also ask what Dana White, Lorenzo and Frank Fertitta’s know when they entered the business ? Last I heard until 2006 had lost 40 million on the UFC after also only buying it for 2 million! Only after that did they begin to make money and make money they did.
    It goes to show anything can happen.

    By available information Stratus Media Group is already a 120+ million dollar Market Cap Company. Looks like they might have something to work with and its great to competition in the MMA Industry especially with so much room it it!

  3. Joseph on October 26th, 2009 11:47 AM

    Well, for one, Pro Elite gets 10% I believe, or some small percentage of money, from the deal that Strikeforce signed with Showtime/CBS. Another interesting thing is that Pro Elite may still be getting something from Bully Beatdown, TV deals, and whatever KOTC is getting, though I believe they recently left Pro Elite. Very interesting indeed though.

  4. Jack on October 26th, 2009 1:23 PM

    The SEC filing states: “..Company for payment of outstanding liabilities, general working capital and other corporate purposes and repayment of all amounts due under a note of the Company with respect to advances made to the Company by SMGI of $100,000”

    Due to the working capital & other corporate purpose comments, it would appear that Proelite has less than $2 million in liabilites. Those liabilities will be the true cost of the acquistion since SMGI will own and control Proelite’s capital & corporate spending.

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