Endeavor
Endeavor, the sports and entertainment giant that owns agencies WME and IMG, announced on Tuesday it will be acquired by private equity firm Silver Lake in a deal that values the company at $13 billion. The move arrives three years into Endeavor’s tenure as a publicly traded company and just six months since WME’s chief rival, CAA, came under new ownership.
Silver Lake is Endeavor’s largest shareholder, having made its initial investment in WME in 2012 and purchasing IMG two years later, and plans on acquiring 100% of the remaining shares by offering stockholders $27.50 per share in cash, representing a 55% premium to the unaffected share price of $17.72 per share. Endeavor noted that was the price of shares on Oct. 25, 2023, a day before the company disclosed a review of strategic alternatives that included going private.
The company, which went public in 2021 following pandemic-era delays, currently trades as EDR on the New York Stock Exchange, closing at $25.81 on Tuesday (April 2).
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In addition to WME and IMG, Endeavor’s portfolio includes live event hospitality firm On Location, marketing agency 160over90 and sports betting data firm OpenBet. Endeavor is also the majority owner of TKO Group Holdings, formed last year to merge its martial arts league UFC with World Wrestling Entertainment. TKO is not part of the Silver Lake acquisition, however, and will continue trading on the NYSE as “TKO” and “will continue to benefit from its connectivity to Endeavor’s expertise, relationships, and significant capabilities,” the company clarified.
Led by co-CEOs Egon Durban and Greg Mondre, Silver Lake’s $102 billion in combined assets includes a portfolio of companies like Oak View Group, Fanatics, TEG, Waymo, Stripe, Plaid, SoFi and Madison Square Garden Sports, among others.
Endeavor said the transaction is fully financed through equity from Silver Lake and additional capital from partnering investors, including Mubadala Investment Company, DFO Management, Lexington Partners, and funds managed by Goldman Sachs Asset Management. Members of Endeavor’s leadership team, including chief executive Ari Emanuel, executive chairman Patrick Whitesell and president and COO Mark Shapiro, will also roll over their equity, and new debt financing was secured by Goldman Sachs, JP Morgan, Bank of America and other institutions.
“Since 2012, Endeavor’s strategic partnership with Silver Lake and Egon Durban have been central to our evolution into the global sports and entertainment leader we are today,” said Emanuel. “We believe this transaction will maximize value for all of Endeavor’s public stockholders and are excited to continue to unlock and invest in the growth opportunities ahead as a private company.”
Stephen Evans, managing director of Silver Lake and a director of Endeavor, said: “The team at Silver Lake is proud of our longstanding partnership with Endeavor, marked by more than $3.5 billion of direct investment across six distinct transactions over 12 years. We are excited about what we can achieve together in this next phase, spearheaded by Endeavor’s visionary expertise across talent representation and content and ownership of truly special, marquee assets in sports.”
WWE and the company that runs Ultimate Fighting Championship will combine to create a $21.4 billion sports entertainment company.
A new publicly traded company will house the UFC and World Wrestling Entertainment brands, with Endeavor Group Holdings Inc. taking a 51% controlling interest in the new company. Existing WWE shareholders will hold a 49% stake.
The companies put the enterprise value of UFC at $12.1 billion and WWE’s value at $9.3 billion.
The new business, which does not yet have a name, will be lead by Endeavor CEO Ari Emanuel. Vince McMahon, executive chairman at WWE, will serve in the same role at the new company. Dana White will continue as president of UFC and Nick Khan will be president at WWE.
“Together, we will be a $21+ billion live sports and entertainment powerhouse with a collective fanbase of more than a billion people and an exciting growth opportunity,” McMahon said in a prepared statement Monday.
He also provided some idea of where the focus of the new company will be, saying that it will look to maximize the value of combined media rights, enhance sponsorship monetization, develop new forms of content and pursue other strategic mergers and acquisitions to further bolster their brands.
Ties already exists talent wise between WWE and UFC, with stars such as Brock Lesnar and Ronda Rousey crossing over between the two businesses.
The deal between Endeavor and WWE catapults WWE into a new era, after functioning as a family-run business for decades. McMahon purchased Capitol Wrestling from his father in 1982, and took the regional wrestling business to a national audience with the likes of wrestling stars such as Andre the Giant, Hulk Hogan and Dwayne “The Rock” Johnson. The company, which changed its name to World Wrestling Federation and later World Wrestling Entertainment, hosted its first WrestleMania in 1985.
McMahon, in an interview with CNBC, addressed the notion that there was doubt among some WWE fans and industry experts that he would ever make a deal for the business. “It’s the right time to do the right thing. And it’s the next evolution of WWE,” he said.
The announcement of the WWE sale arrives after McMahon, the founder and majority shareholder of WWE, returned to the company in January and said that it could be up for sale.
Rumors swirled about who would possibly be interested in buying WWE, with Endeavor, Disney, Fox, Comcast, Amazon and Saudi Arabia’s Public Investment Fund all in the mix.
McMahon acknowledged to CNBC that there were several suitors for WWE, but that combining with Endeavor is the right move.
“It makes all the sense in the world for all these synergies that we have to extract all of the value that we can out of the marketplace,” he explained.
Media industry analysts viewed WWE as an attractive target given its global reach and loyal fanbase, which includes everyone from minors to seniors and a wide range of incomes.
The company held its marquee event, WrestleMania, over the weekend. Last year, WWE booked revenue of $1.3 billion.
The company is also a social media powerhouse. It surpassed 16 billion social video views in the final quarter of last year. It has nearly 94 million YouTube subscribers and has more than 20 million followers on TikTok. Its female wrestlers comprise five out of the top 15 most followed female athletes in the world, across Facebook, Twitter & Instagram, led by Ronda Rousey with 36.1 million followers.
WWE had more than 7.5 billion digital and social media views in January and February of this year, up 15% from the same time frame a year ago.
The new company plans to trade on the New York Stock Exchange under the “TKO” ticker symbol. Its board will have 11 members, with six being appointed by Endeavor and five being appointed by WWE.
“We like the assets of UFC and also WWE in a world where linear TV is losing market share to streaming, thus live sport content is in high demand,” wrote Jeffries analyst Randal Konik said in a note to clients.
The transaction, which was approved by the boards of Endeavor and WWE, is targeted to close in the second half of the year. It still needs regulatory approval.
Shares of World Wrestling Entertainment Inc., based in Stamford, Connecticut, are up 33% this year, but fell 5% at the opening bell Monday. Shares of Endeavor, based in Beverly Hills, California, slipped less than 1%.
Amid a broader economic downturn, Endeavor — the parent company of assets like agencies WME and IMG, sports league UFC, events firm On Location and online gambling platform OpenBet — is pausing new hires through the end of the year.
Speaking to The Hollywood Reporter by phone while attending an RBC Capital Markets investor event, Endeavor president Mark Shapiro said that the firm will put in place a hiring freeze until 2023 but noted that the Beverly Hills-based conglomerate will be backfilling positions. The Endeavor executive emphasized that no broader cost-cutting would be instituted and travel/expenses, bonuses and spending would not be subject to review at this time for the company’s roughly 8,000 employees.
“The state of the business is strong, but we have to be responsible given the time of the year and the national economic environment,” Shapiro told THR.
The Endeavor exec stressed that the move was being made from a position of strength, as the firm — unlike other Hollywood giants — has been insulated from economic headwinds like those impacting advertising-reliant companies. And the time frame for the hiring pause, as the holiday season approaches, arrives at a typically slower cycle for major agencies, which tend to mostly close up shop in the last couple weeks of the year.
“We need to really be prudent, we’re in — or walking in — to a recession,” Shapiro said about the hiring freeze during a panel moderated by RBC’s Kutgun Maral. “There’s a lot of fear out there, there’s a lot of fearmongerers. And we just need to keep a lean cost-structure, frankly. As tight as we can have it. And hiring over the holidays does no good, you’re just giving them vacation anyway.”
Shapiro added during the panel that, “at a time like this of uncertainty, we need to be conserving cash and just working on the balance sheet.” The Endeavor exec forecast that the focus in 2023 would be more free cash flow — a profit metric showing an ability to fund operations without outside financing — and expanding margins in each business unit.
But the hiring freeze does arrive as Warner Bros. Discovery, Disney, Paramount, NBCUniversal and others are instituting belt-tightening measures, including cutting back on spending and staff reductions. Disney CEO Bob Chapek warned in a memo to staff on Nov. 11 of “limiting headcount additions through a targeted hiring freeze” while layoffs have been ongoing at the David Zaslav-run Warner Bros. Discovery, impacting multiple divisions including CNN, whose chief, Chris Licht, forecast in late October that restructuring will “accelerate” and will result in layoffs and budget cuts.
On Nov. 10, Endeavor disclosed its third-quarter earnings, with its WME and IMG representation unit seeing revenue fall year-over-year to $388 million from $664 million — due to the sale of 80 percent of Endeavor Content to South Korea’s CJ ENM as part of a deal with the Writers Guild — even as the core agency business made strides. Meanwhile, the company’s owned sports properties, like UFC, saw revenue gain from $288.5 million a year ago to $402 million in the third quarter this year and its events unit stayed about even year-over-year with $440 million in revenue for the frame.
Overall, citing foreign exchange rate changes, Endeavor posted a loss for the quarter of $12.5 million compared to a gain of $63.6 million in the same time frame in 2021. During an earnings call, Endeavor chief Ari Emanuel noted “our business continues to perform well despite the macro headwinds,” and touted comedy bookings as well as growth in music touring, experiences and demand to attend live events.
“Spending habits have shifted, but our company has a presence at every point on the purchase chain,” Emanuel added. “During COVID people were buying stuff, and post-COVID, they are more focused on experiences, and we are the benefit of that side of the equation.”
Since Jan. 3, the first day of trading this year, stock in Endeavor has fallen about 34 percent, from 34.81 a share to 22.92, while the New York Stock Exchange Composite Index has dropped about 10 percent.
This article was originally published by The Hollywood Reporter.
Endeavor Group Holdings, the parent company of UFC, WME and IMG, posted revenue of $1.2 billion in its third quarter, as foreign exchange rate headwinds pushed it to a net loss of $12.5 million.
Despite the difficult macroeconomic environment being felt across the tech and media sectors, Endeavor remains bullish on its prospects, touting its exposure to sports and live music, which are still posting strong results.
“Our business performed well in the quarter despite a turbulent macroeconomic environment,” said Endeavor CEO Ari Emanuel, in a statement. “Given our unique positioning relative to a set of highly resilient secular industry trends across premium sports and entertainment content and live events, we remain confident in our ability to continue delivering on our long-term growth strategy while also being good stewards of capital.”
Emanuel elaborated on those comments on the earnings call, saying that the company simply isn’t seeing demand for live events and experiences slow down.
“Spending habits have shifted, but our company has a presence at every point on the purchase chain,” he said. “During COVID people were buying stuff, and post-COVID, they are more focused on experiences, and we are the benefit of that side of the equation.”
Endeavor also adjusted its full-year 2022 guidance, raising its guidance for adjusted EBITDA to between $1.145 billion to $1.175, and indicating that revenue will be between $5.235 billion and $5.325 billion, on the low end of its prior guidance.
During the earnings conference call, Emanuel reitrated the company’s position as a middleman, able to carve out pieces of the content and live sports business, and in its owned and operated segments, to take the entire slice.
“These leading tech companies go head to head with major streaming and media players, including Disney, Netflix, NBCUniversal, Warner Bros. Discovery and Paramount for the best video, podcasts gaming, and social content,” Emanuel said.
On the sports side, Emanuel said that “we’ve positioned ourselves on the supply side of this industry, working directly with rightsholders, and sportsbooks to deliver everything from official data, streaming feeds to betting and mobile apps.”
“In sports, the demand for premium talent-led content and shows no sign of slowing. In fact, opportunities for talent are expanding into new formats,” he added.
The company is also undergoing significant change in its structure, as it completed the acquisition of OpenBet (and prepares to launch a new sports betting division) and with the sale of 80 percent of Endeavor Content, which impacted revenues at the company’s representation unit.
In representation, revenue was $388.3 million, down 42 percent from the same quarter a year ago. That drop was almost entirely due to the loss of Endeavor Content, which was sold to CJ ENM. When excluding revenue tied to Endeavor Content, the company’s representation business was up 17 percent compared to last year, suggesting continued strength in the sector.
In sports, which is led by UFC and Professional Bull Riders, revenue was $402.3 million, up 39 percent, thanks to increased rights fees, an extra live pay-per-view event, and more live attendance at events.
And in Endeavor’s events, experiences and rights segment, revenues were $440.6 million, down 1 percent compared to last year, due to the timing of some events.
Endeavor says it also paid off some $250 million in debt in Q3, and plans to pay down the same amout in Q4.
This article was originally published by The Hollywood Reporter.
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