Mystery Strikeforce Third Bidder, Early Signs Of Sale, & UFC Purchase Notes

March 15, 2011

There were two other bidders in the running to acquire Strikeforce MMA from Silicon Valley Sports & Entertainment (SVSE) and Strikeforce CEO Scott Coker. In the end, both suitors were unable to match the bids put by Zuffa LLC, owners of the UFC, as the ante was raised several times until an agreement was reached.

According to Dave Meltzer of Yahoo:

Coker wouldn’t say who else was bidding to buy the company, but Pro Elite, Inc., which had the Showtime deal in 2007 and 2008 before going belly-up and having its assets purchased by Strikeforce in early 2009, had raised new capital and had reportedly made a $40 million offer.

Other names, including Shelly Finkel, Mike Tyson’s manager, were reportedly interested. While Fertitta said he was not aware of other offers while negotiating this deal, insiders with knowledge of the negotiations said the UFC deal was more lucrative and they kept raising the ante until the deal was agreed upon.

 

As for the reason for the the sale, Scott Coker shared his side during Monday’s press conference:

“Silicon Valley Sports and us were great partners,” Coker said. “They wanted to get back to their core business, the hockey business and expansion of their other sports businesses. We had a long conversation and started taking different offers and then we started talking to Lorenzo. They had a really good time in this business, but they wanted to get back to their core business. I wanted to stay in this business and this is how we hooked up.”

Now, while this announcement was a shock to many, there were some signs and discussions that hinted at the notion in the last 6 months.  Folks within knowledge of how Strikeforce worked said it was tough to do everything they wanted to do given the budget and constraints they were given.  There seemed to have been some tug-of-war game between Coker and SVSE, who grew inpatient his year with Strikeforce’s returns.  According to Loretta Hunt of LA Times, Strikeforce had incurred debt, though they were slowly headed in the right direction as the early success of 2011 showed with record ratings and buzz for the promotion.  Insiders say that Strikeforce grew too big for SVSE to want to further commit any more resources, since it would eventually lead into a war with UFC, which were brought up by three key events: the Showtime deal, the Fedor deal, and talk of heading into the PPV market.

Back in September of 2010, talks of a Strikeforce sale surfaced within the MMA world, and MMAPayout contacted both SVSE and Scott Coker to get their take on the matter. Scott Coker said the rumor was untrue, while SVSE (who was involved due to the news that CEO Greg Jamison was stepping down as of October last year) made the following statement:

As is the case with all properties owned and operated by Silicon Valley Sports & Entertainment, Strikeforce [a joint venture between SVS&E and WCP] is not for sale and the day-to-day operations of Strikeforce will continue under the direction of President Scott Coker.

Only a few months after this statement was issued, talks between SVSE, Scott Coker, and Zuffa (among other bidders) commenced as both SVSE and Scott Coker began to part ways.  Was SVSE already heading in a different direction last year and could it have possibly triggered the sale?

As for the bidders, Pro Elite was bought by the Stratus Media Group back in October of 2009, after the company filed for bankruptcy and who’s key assets were purchased by Strikeforce and SVSE to strike the Showtime deal.  Stratus Media is an owner, producer, promoter and operator of live entertainment events that generate revenue through corporate sponsorships, ticket sales, corporate hospitality, event merchandise and concessions, who also provide athlete management, representation and endorsements. The ProElite group, who was heading this venture in bidding for Strikeforce, were original PE members Doug De Luca, William Kelly, Glenn Golenberg, along witch newly appointed Chairman of the board Paul Feller from Stratus Media.  It was said they raised enough capital to place a bid for $40 million dollars, though was eventually outbid by Zuffa.

The other bidder was from a group headed by Shelly Finkel, who is Mike Tyson’s manager and has been one of the most powerful managers in boxing for the past 30-plus years.  Finkel officially announced that he was leaving the sport of boxing back in June of 2010, citing politics of the sport as the reason he was driven away to where he got his start, music promotion under Empire Sports and Entertainment.  Although Finkel left boxing, he continued to act as an advisor to heavyweight champions Wladimir Klitschko and Vitali Klitschko, with whom he has worked for several years.  Empire Sports and Entertainment’s mission was said to become a leading media and entertainment company known for promoting the best events in concerts, music festivals, pay-per-view specials and sporting events around the world.

 

UFC/STRIKEFORCE PRESSER NOTES:

– Business will stay as usual for Strikeforce according to Dana White, although most believe it will stay as usual until the Showtime TV deal runs its course in Feb/March of 2012, which at that time may merge Strikeforce into the UFC like it did PRIDE, WFA, and the WEC. They will stay as separate entities until then.

– The Fertitta’s and Dana White made it very clear to steer away from any monopoly talk brought up by reporters, citing that there are thousands of promotions all over the world and there is nothing that is stopping anyone with backers to get into the market and compete. They also made it a point to state that any sort of fighter union would be up to the fighters.

– As part of the sale, Scott Coker got a long-term contract to work for Zuffa, but NO ownership stake in the company.

– Zuffa cited that there is a big demand for their product in Canada, Australia, and the UK (global expansion).  The addition of Strikeforce and Scott Coker would help aid that demand.

– The heavyweight GP will continue as planned, and the finals may be held as a PPV event.

– Strikeforce will now abide by the Unified Rules, which means elbows to a grounded opponent will be allowed.  Strikeforce will continue to use its six-sided cage and production and commentary team from Showtime.

– Talks between Showtime and Zuffa have yet to take place.

– Zuffa was in the San Jose today to pay a visit to Strikeforce offices, which met with the staff.  Strikeforce will be sending some of their personnel to Las Vegas later this week to meet and get acclimated with Zuffa staff and culture.

25 Responses to “Mystery Strikeforce Third Bidder, Early Signs Of Sale, & UFC Purchase Notes”

  1. Larsenator on March 15th, 2011 4:52 AM

    Excellent summary mate! 🙂

  2. Diego on March 15th, 2011 5:12 AM

    They cashed Coker out, smart for both parties. Zuffa will get all the upside, and Coker has the option of leaving anytime he wants. If he kept his ownership stake Zuffa could have always run down the brand by taking all the top fighters into the UFC and leaving SF as a feeder show and devalued Coker’s stake.

    Long term Coker could become a very powerful guy at Zuffa. Dana is too abrasive for day-to-day operations and the time will come when Zuffa will want a more polished figurehead. At the very least when dealing with fighters Coker has shown that he can get deals done that Dana can’t. And that was when he didn’t have the marketing muscle or $$ of the UFC behind him.

  3. Ed on March 15th, 2011 7:27 AM

    Was the Pro Elite offer of $40 million for the whole company, or for only SVSE”s 50% share?

  4. John S. on March 15th, 2011 7:33 AM

    Mr. Medoza,

    Great write up. Nice to see someone trying to sort out what actually took place. A couple of questions that I hope you can eventually answer:
    1) What is the final sales figure?
    2) What was Strikeforce’s debt load?
    3) Any clue as to what SVSE’s motivation for selling was? Was Strikeforce bleeding too much money? Or was it their other holdings or perhaps a lack of interest in the risks of trying to be a national promotion?
    4) DId Showtime know about the sale in advance? Was there no effort on their part to keep Strikeforce out of Zuffa’s hands.

    Thank and keep up the good work.

  5. Steve on March 15th, 2011 9:33 AM

    In regards to the ProElite offer of $40 million, there are unsubstantiated rumors floating around that a large chunk of that was in ProElite stock options (which are pretty damn useless). A smaller cash offer from Zuffa might have been much more attractive than ProElite’s option-heavy offer.

  6. Steve on March 15th, 2011 9:38 AM

    As far as SVSE’s motivation to sell, I don’t think they were ever on-board with the shift towards national expansion and a broadcast TV model.

    When they bought into Strikeforce, they bought into a lucrative little company that could help them fill empty dates on the HP Pavilion’s schedule. I don’t think they ever intended to invest in a traveling MMA company with a broadcast TV focus. They were happiest when Strikeforce was focused on generating fat attendance numbers in San Jose.

  7. jv on March 15th, 2011 9:52 AM

    Frank Fertita announcing that SF would be following the Unified rules and not Scott tells me every thing I need to know about what Scotts real role is. My big question is if he had to sign a non-compete and what are the terms if he did. Coker should have left with the sale.

    For me it is going to be way to pain full to watch as Zuffa slowly turns SF into the MFC over the next year and starts blowing out the SF fighters. Personally I would prefer if SHO just said no and they terminated the contract. Far better that listening to people in the future describe SF as a promotion of only guys on 4 and 5 fight losing streaks in the UFC. Part of the game plan for the next year will be to try and ruin the reputation of SF.

  8. Diego on March 15th, 2011 10:21 AM

    jv,

    I share your pessimistic view, but I’m willing to give Zuffa a chance if for no other reason than Scott Coker is still running Strikeforce. He’s a rich man now and if he wanted to he could have retired or gone back to promoting kickboxing (K-1 needs help right now and there’ s a lot he could probably do there or I’m sure he could continue to pack out the HP Pavilion if he wanted to go back to being a regional player). He chose to stay with the company, and I’m guessing that’s because he felt he could still grow the brand and continue to develop the roster of fighters.

    Once upon a time the talk was that Pride would be run independently and UFC and Pride champs could square off every so often to establish a true #1 in the world. I think the depth of the rot in the Pride organization took Zuffa by surprise and they wound up just folding the company (perhaps that was their intent all along, it’s hard to be sure). There’s no such issue with SF, and I personally would love it if every 12 or 18 months Zuffa held a “night of champions” where all the SF and UFC champs fought each other. I think it would be very lucrative as well if for no other reason than the buzz that has always existed in UFC vs. Pride and UFC vs. SF discussions would be allowed to come to a head. I don’t think SF is worth as much to Zuffa as a feeder league. This may be a case where the parts are greater than the sum.

    Am I optimistic? No. Am I hopeful? Yes.

    And it still sucks for the fighters either way.

  9. Steve on March 15th, 2011 11:24 AM

    “Part of the game plan for the next year will be to try and ruin the reputation of SF.”

    I don’t buy that.

    Zuffa doesn’t want their name associated with a sub-par product, nor do they want to alienate Strikeforce fans who they hope to convert to paying UFC customers. That’s just bad business.

  10. Sergio on March 15th, 2011 2:03 PM

    Hey guys a quick question here?

    How dose or would this buyout benefit the smaller orgs like Shark Fight,MFC etc…I mean dose this send a a message of any kind to the networks, sponsors etc. that MMA is a potential product to invest in?

    why wouldn’t Shelly Finkel,Pro Elite etc. try to work something out with the smaller orgs? Granted they are not as established as SF but better then starting from scratch.
    Im curious to hear any of your thoughts, opinions Thank You!!

  11. Jose Mendoza on March 15th, 2011 2:07 PM

    Sergio:

    I will cover that in my next write-up! I will throw out some dollar figures out there. 🙂

  12. Sergio on March 15th, 2011 3:29 PM

    Thanks Jose

    I look forward to reading that! FYI..Ive been following MMA since 96 when it was called NHB Vale Tudo Shootfighting most of my info came from Joe Golds Full Contact Fighter newspaper I lived in Dallas n trained at Guy Mezger gym off Pearl st.inside the 24hr Fitness Gym.Got good insight info from him too!

    Im currently living in Albuquerque NM(off n on my whole life) and its crazy to see the Texas,Calif, promoters go from underground fight clubs 25-50 ppl,100-300ppl struggling to make it work to now 500-2000 ppl,media coverage,big sponsors,big paydays…now buyouts!!Greg Jacksons MMA series has exploded over the last few years,then again Abq has always been a fight town since the glory days of Jonny Tapia,Danny Romero

    My point being to all of this is that with the SF buyout.it will be interesting to see how it effects all the up n coming orgs,Bellator and the whole business landscape of MMA .Im also curious to know where you guys MMA in the next 10 years..2020? do you see it as a national sport like NBA,NFL,MLB? Will it be a fad over the next 10-15 years n go the way of NJPW/K-1/JMMA? Im sure MMA will be huge but will it stick around long term AFTER that those10-15 years? Id like to hear your thoughts, ideas opinions!

    Thank You!!

  13. edi on March 15th, 2011 4:18 PM

    Frank Shamrock must feel the cold wind of change blowing across SF Bay.

  14. Jose Mendoza on March 15th, 2011 4:51 PM

    UPDATE: There apparently was another mystery bidder (considered the 3rd bidder) that those who know of the group’s identity cannot reveal. Trying to find out who it is but it is proving to be quite difficult.

  15. Sergio on March 15th, 2011 5:31 PM

    Wow!

    The plot thickens!! Do you have any ideas, speculations as to who it might
    be? A national or international buyer? I honestly dont know who it could be?
    Also if you guys haven’t already..be sure to listen to No Holds Bared Eddie Goldman most recent podcast with Rob Maysay of MMAFA.They discuss the recent SF buyout and really dig into this story! They give lots of great insight n with tons of nuggets of great info! Highly recommended! Check it out!

  16. BrainSmasher on March 15th, 2011 6:53 PM

    Diego

    Exactly what deals did Coke get done that Dana couldnt? You mean bend over for Fedor until you have no control and cant make the fights that you want or when you want? You really thing Coke would have made that deal if he was President of a company that actually had a future and didnt have to take risks? Or are you talking about getting a deal with Showtime when the UFC already had the opportunity and passed because they actually have standards? Strikeforce took any deal be it TV or with fighters rather than the right deal and that is why they are owned by Zuffa today. Coke didnt accomplish anything Dana White couldnt. He just took deals Dana White was in position not to have to accept. In the end Dana proved to have made the better choice. Showtime simply wasnt profitable enough and they have stuck their nose in the operation since the begining even trying to dicatate when fighters fought and who they fought to sticking Strikeforce with a shitty head announcer in the booth in Gus Johnson. SF was powerless because they give away their control when the UFC knew this would happen and refused to accept deals from the likes of HBO and others because of it.

    Coker handcuffed himself with the decisions he made. He no longer had control over Strikeforces future because he couldnt control the product on TV (Showtime) and couldn’t control the biggest fights (Fedor, Werdum, Barnett) and had to many people to answer to due to his “partnerships” with M-1, Dream, CBS, Showtime, and SVSE.

  17. BrainSmasher on March 15th, 2011 6:57 PM

    “Strikeforce had incurred debt, though they were slowly headed in the right direction as the early success of 2011”

    Where is all the people who argued with me when i said Strike force wasn’t making a profit? You guys claimed they kept cost low and made a profit on each events. I will just chalk it up to blind nut riding and leave it at that.

  18. jv on March 15th, 2011 8:12 PM

    Diego: We don’t know the condition of the sale. As part of the deal Coker may not be allowed to work in the martial arts field again.

    BS:

    Zuffa is half a billion dollars in debt and had to borrow more to buy SF. I guess that must mean that the UFC is a disaster as well. The difference between Coker and White is that White has friends that inherited big time from their parents.

  19. Sergio on March 15th, 2011 10:04 PM

    Brainsmasher:
    According to Eddie Goldman SF was turning a pretty decent profit from most of the international tv deals they did last year or so but they also racked up a fair amount of debt and SVSE didnt want to pump any more money/take on anymore debt.Word is that Coker tried to keep control of the SF product but was sold out by is partners at SVSE who saw the offer from Zuffa as an opportunity to sell at the peak of the market & get out of all that debt.and IMO not a bad business move considering the state of the economy!

    Diego:
    I totally agree with you!! As much as I respect Coker,he really did sign deals,contracts that were too lose and open ended..In short he let the lunatics
    run the asylum and it showed!

    JV:
    the idea of Coker not working in the martial arts field as a competitor, promoter again via a no compete contract clause is something that I never thought of… Interesting!
    Billionaires like the Fertitta Bros dont STAY wealthy using their own money to do deals even if they got millions to burn,they will always leverage Other Peoples Money or OPM as the wealthy refer to it .Im sure they coulda easily paid cash for whatever the SF asking price was but it was just as easy for them to find a money partner,pay him a percentage,leverage themselves into the deal,and have little risk themselves but big rewards.
    So if Zuffa is half a billion dollars in debt and the UFC crashed tomorrow?..Yeah sure the Fertittas would take a hit but they would be so well leveraged n protected in their deals that they’d still be siting pretty at the end of the day! Thats how they stay wealthy and thats how they end up on Forbes Billionaire List.

  20. BrainSmasher on March 15th, 2011 10:11 PM

    If you believe that, you are a moron. Dana has made plenty of decisions in his tenure that have turned out very well. No one cant deny the problems that Coker faced due to HIS decisions to give in to fighters and networks. He gambled in hopes of making it big and it didnt work.

    Also there is a difference between being in debt due to expansion and not being profitable. SF was not making money on their events for many reasons. As soon as they showed promise in 2011 they then had to face negative press when they postponed the GP. This was another sign of poor management.

    So go ahead and keep telling yourself that the success of the UFC from tv deals all over the world, regulation, partnerships, and promotions is all due to the dumb luck of Dana White and he really has no clue what he is doing.

  21. BrainSmasher on March 15th, 2011 10:47 PM

    I dont trust anything Goldman says. I followed him back in the day when he hosted NHB radio on Eyada. But he is not all there and is very unprofessional as a reporter. He has held a grudge against the UFC for years and has been cherring the competitors ever since. Most of the top promotions have had internation tv deals. They never pay well. Curtainly not to the point of being the difference in profitable or not. Elite XC had them, Pride had them, and Strikeforce and the UFC have them. They give them away almost free to cultivate a fanbase in those countries. If they cant demand a profitable tv contract in the US where they have fans, how can they get one in a country that has much fewer viewers?
    I believe SF was paying to be on NBC at midnight. So any deal where they didnt have to pay to get on tv would be considered a great deal for them.
    Also the value of all these international deals with all the promotions past and current have never been made public. I highly doubt Eddie Goldman had privy to those numbers.

    What we do know is SF parent company wanted out for a reason and it seems that reason was they just wasnt making money. For them to try and make it profitable it required them to risk tons of money which they werent prepared to do.

  22. Jose Mendoza on March 15th, 2011 11:48 PM

    BrainSmasher:

    What was said about Strikeforce is that they made little profit or was in debt but not huge amounts. For MMA, they were doing a great job compared to IFL, Affliction, EliteXC, or early UFC. The problem if you read above is that at some point, SVSE wanted to concentrate on other parts of their business and did not want to to be funding a worldwide promotion. SVSE was happy with Strikeforce as an event that would pack the HP Pavilion as a regional promotion, but once they switched over and became a competitor to the UFC, they would have needed a good amount of investment money to keep going. Everyone I have spoken to said SF was heading in the right direction and had picked up momentum in the last 6 months, so debt wasn’t the main reason for the sale, but it was just backers that weren’t fully dedicated to take SF where it wanted to go.

    There is a lot more stuff that went on the background, but we don’t know all the details just yet. What we have seen in MMA is that no promotion has been able to succeed without PPV money.

  23. Sergio on March 16th, 2011 12:06 AM

    Brainsmasher:
    Ha!ha! you are def right about Goldman…he is out there,kinda nuts speculates alot but makes some good points and isnt afraid to spit in the UFCs eye! other mma reporters are too afraid to take a shot at Dana for fear of losing their credentials.

    The international tv deals were just another revenue stream I know UFC used them as leverage to take advantage of regional sponsors. For example i saw the Both the Abu Dabi Silva vs Maia ppv And their version of UFC Unleashed n they both had cell phone,soda,n some weird hair thing for men products being pushed.I Do know that UFC gets a cut of that action.Weather Sf,Pride,Pro Elite were able to do the same..IDK?

    So let me ask my question again and any response would be appreciated!

    It will defiantly be interesting to see how the SF buyout effects all the up n coming orgs Shark Fights,MFC, even Bellator and the whole business landscape of MMA .But Im curious to know where you guys see MMA in the next 10 years..2020? do you see it as a national sport like NBA,NFL,MLB?which is what Dana/Zuffa are aiming for?
    or will it be a big fad for the next 10-15 years n eventually fade away the way NJPW/K-1/JMMA did? I know scandle n corruption help kill NJPW/K-1/JMMA but alot of my jap contacts told me Japan is a fad driven country anyway.

    Im sure MMA will be huge but will it be able to sustain itself and be accepted in the eyes of the american public and stick around long term AFTER those first 10-15 years? Id like to hear your thoughts,ideas,opinions!
    Thank you!

  24. shawn on March 16th, 2011 8:01 AM

    I am now believing that signings of Dave batista and Bobby lashley were put on hold cause of these deal as dana was not wanting any more wrestling side shows until Brook is back. Also Dana stopped trashing Walker for being too old after his secound fight………..small things but another way that shows hints of a deal going down…………plus Dana knew about the sale weeks ago, even before Fedor’s loss so when he got in online spat with a M1 employee I am sure he was laughing inside as Scott Coker was trying to deflect things.

  25. Would you invest money into MMA in this business climate? (Audio show included) | FightOpinion.com – Your Global Connection to the Fight Industry. on March 16th, 2011 6:47 PM

    […] Jose Mendoza: Mystery Strikeforce third bidder, early signs of sale, and UFC purchase notes […]

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