World Wrestling Entertainment Inc. was headed for potentially the biggest drop in almost two years after Endeavor Group Holdings Inc. struck a deal to buy the entertainment conglomerate for $9.3 billion including debt.
The transaction values WWE at about $106 a share, before any post-closing dividend, the companies said in a statement on Monday, confirming an earlier report by Bloomberg News. The combined businesses will have an enterprise value of more than $21 billion, they said, with Endeavor holding a 51% controlling interest and existing WWE shareholders with a 49% interest. The company will be led by Ariel Emanuel, chief executive officer of Endeavor.
Existing WWE shareholders will roll all existing equity into a new entity that will aim to be listed on the New York Stock Exchange. The listing will expand the collective investor base to allow for broad market participation, the companies said.
WWE shares were down as much as 11% in pre-market trading in New York at $81 a share, the lowest in almost three weeks. The previous biggest decline at the close of a trading day was 5.8% in July 2021. The shares had climbed 33% this year as investors expected a sale, giving it a market value of about $6.8 billion. Endeavor was up 2.8%.
The two companies said they would each contribute cash to the new company so that it holds about $150 million.
Under the terms of the transaction, existing WWE shareholders will roll all existing equity into the new entity that will be the parent company of UFC and WWE (“NewCo” until it is named at a later date) and intends to list on the New York Stock Exchange under the ticker symbol “TKO”. The listing of NewCo will expand the collective investor base to allow for broad market participation across Endeavor and NewCo.
Endeavor has been pursuing WWE for the past few months, eager to combine the wrestling league with its Ultimate Fighting Championship and become the undisputed king of combat entertainment. Emanuel aims to use his company’s existing expertise and resources in negotiating media rights and staging events all over the world to increase sales and cut costs at WWE.
“This is a rare opportunity to create a global live sports and entertainment pureplay built for where the industry is headed,” Emanuel said.
Vince McMahon, WWE’s 77-year-old controlling shareholder, has run WWE for four decades. He will remain involved in the business after the deal, as will Nick Khan, the company’s CEO. McMahon described the deal as “without a doubt the best outcome for our shareholders and other stakeholders.”
McMahon reinstated himself as executive chairman in January to oversee a strategic review of the company. He left the firm last year following revelations that he had paid millions of dollars to settle sexual misconduct claims. While he was gone, the leadership of the company began to discuss strategic options ahead of the next round of negotiations with companies that air WWE matches on TV.
WWE is a rare prize in media. Though it is scripted entertainment, it delivers a live audience for its events akin to a sporting event. Fox Corp. and Comcast Corp. pay hundreds of millions of dollars a year for the rights to show the matches. The sale is being finalized against the backdrop of Wrestlemania, one of the biggest events on WWE’s calendar. This year’s event is being held across two days in Los Angeles.
Emanuel and his leadership team have transformed Endeavor over the years from its roots representing Hollywood actors into a multi-faceted media company. They represent athletes, sell media rights to sporting events and own live events across sports and fashion. They also operate sports-betting technology company.
The firm went public in 2021 after scuttling an attempt at an initial public offering in 2019. Its shares closed Friday just 7 cents below their $24 IPO price, giving the company a market value of $11.3 billion.
UFC is the most valuable asset Endeavor owns, and now Emanuel has doubled down on combat sports.
WWE is a business like few others. It’s a combination of sports and entertainment with devoted fans who show up to follow the story lines in and out of the ring. Some 80,000 fans turned out each of the two nights to fill SoFi Stadium in Los Angeles for the company’s annual Wrestlemania. Fans even cheered the hosts at an outdoor stage during a pre-game show. Many of them sported gold championship belts that cost hundreds of dollars.
Pedro Calhau an IT worker from Portugal was attending his first Wrestlemania. He spent $400 for his belt, which was draped over his shoulder.
“It’s like a soap opera, it’s like theater,” Calhau said outside the stadium. “For us, it’s a getaway.”
He said he thought the $9 billion was a fair price, adding “I hope they give back some to the fans.”
Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC are serving as financial advisors to Endeavor, and Latham & Watkins LLP is serving as legal advisor to Endeavor. The Raine Group is acting as lead financial advisor to WWE. J.P. Morgan and Moelis & Company LLC are also acting as financial advisors to WWE.
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(With assistance from Christopher Palmeri and Katie Roof.)
