A night after the WWE’s biggest event, the company announced that it would be acquired by the UFC’s parent company Endeavor. The WWE and UFC will merge into a publicly traded company with the moniker TKO.
The acquisition is an all-stock transaction that list the enterprise value of WWE at $9.3 billion. In comparison, the UFC’s enterprise value is $12.1 billion.
The UFC and WWE will spinoff into a new company, NewCo which will build on its value as a generator of sports content. Endeavor will supply NewCo with $150M cash and public shareholders of NewCo will receive a post-closing dividend.
Nick Khan will continue to be the CEO of WWE while Dana White maintains his role at the UFC. Vince McMahon will be an Executive Chairman of WWE while Ari Emmanuel will oversee both WWE and UFC.
The leadership dynamic for the merger puts some of the top leaders in the combat sports/sports entertainment space together. Although one might expect the two entities to work separately most of the time, its hard not to think that there will be “company synergy” during special events.
The parallels between the UFC and WWE are numerous. Notably, the sale of the WWE occurred the night after Wrestlemania. The Endeavor purchase of the UFC occurred the day after the company’s biggest event to date in July 2016 – UFC 200.
Crossover stars Brock Lesnar and Ronda Rousey currently perform for the WWE and have been champions in the UFC. Former UFC light and heavyweight champion Daniel Cormier is a big WWE fan and was featured in a storyline with the company a couple years ago. He also was in the front row during the NXT show on Saturday morning (he was sitting in front of me).
Payout Perspective:
The powerpoint presentation accompanying the announcement reveals some interesting financial tidbits about the WWE and UFC business. The first is that the UFC business model has seen positive financial increases since its purchase by Endeavor. Obviously, Endeavor touting its accomplishments on the heels of announcing this acquisition makes sense for investors. But, UFC’s sponsorship percentage is higher than WWE’s sponsorship percentage. Based on the number of lucrative partnerships WWE has had in the past and just looking at the multiple brands at Wrestlemania this weekend, you would think that WWE would have more a robust portfolio in comparison to the UFC. This is just the percentage of its revenues so WWE does earn more when it comes to media rights but the UFC has been more profitable since 2017 according to the powerpoint.
From a business standpoint, the acquisition reflects a growth period for Endeavor and it will be fascinating to see what direction NewCo will go in terms of acquisition and strategy. In my opinion, combining the two companies is a move toward expanding its reach to a new generation of consumers that will be early adopters to technology and new ways to consume content. Gone are the days of just focusing on linear television and focusing on working on just media and licensing rights. Now, the strategy seems to be sole ownership of content and non-traditional ways of consuming content via social, online, streaming, etc.
Stock prices for WWE and EDR showed modest losses in stock trading on Monday morning but I do not think we’d see wide swings in stock price with Endeavor’s purchase. But, the acquisition is a big move for both companies as WWE, EDR and the UFC look to the future.
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