SBJ provides details of UFC deal
July 21, 2016
The Sports Business Journal took a deep dive into the UFC’s sale to WME-IMG. The article looks into the revenue drivers that had the acquisition price of $4 billion.
The purchase price of $4 billion represents a 22 multiple of the UFC’s earnings before interest, taxes, depreciation and amortization. On $600 million in gross revenue from 2015, UFC’s EBITDA is $180 million. $180m x 22 =$3.96 billion. The hope is that with a new media rights deal, the multiple will lower to 13-14 range which would make it a much better purchase.
Media rights, according to the UFC, could grow to $115 million per year to an average annual payout of more than $400 million starting in 2019.
The media rights do not contemplate PPV or UFC Fight Pass revenue. The UFC is set to start renegotiating in 2018 and believes it will have some leverage as other sports media rights deals run into 2020s.
The other revelation from the SBJ article is that ESPN, Fox and Time Warner all considered purchasing the UFC. The other potential purchasers included China Media Capital and Dalian Wanda Group.
But the concern from the potential buyers was that pay-TV distributors would not feel compelled to increase their affiliate fees which would generate the profit for media companies.
Yet, the UFC was an attractive acquisition here because of its media rights, it owns all of its content and the belief that they can build out the company’s “sponsorship sales and other content opportunities.” So while there is speculation as to whether distributors would facilitate an increase in fees, the opportunity to utilize the UFC’s assets were too good to pass up.
In order to make the acquisition, there is a plan in place to borrow a big portion of the money as part of the acquisition.
Sources: Goldman Sachs is launching a $1.3B 7yr loan (covenant-lite) to back UFC’s $4 billion LBO
Bank meeting tomorrow
— James Passeri (@JamesPasseri) July 21, 2016
According to the Sports Business Journal. Currently, the UFC has approximately $500 million of debt that will be retired as part of the $4 billion acquisition.
The article is a very thorough, detailed analysis of the deal. There is speculation that the deal might sour fall through due to the recent bad press concerning Brock Lesnar and Jon Jones. But, I would think that it might be posturing to obtain favorable concessions rather than actually backing out of the deal. The financing involves higher risk, higher interest bonds which is likely due to a number of factors involving the company’s current finances as well as the way WME-IMG would like to structure the deal.