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Endeavor and WWE: Why has the deal happened and what will the UFC merger look like?

The sale of WWE to Endeavor will see the wrestling promotion housed within a new publicly traded company alongside the UFC. SportsPro assesses why the sports and entertainment group made the acquisition and what comes next for the two properties.

6 Apr 2023 Ed Dixon

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Upon announcing the acquisition of World Wrestling Entertainment (WWE), Endeavor chief executive Ari Emanuel described it as a “once-in-a-lifetime opportunity”. The sports and entertainment group is already setting the wheels in motion to make the most of its multibillion-dollar investment.

Most intriguing is that Endeavor plans to combine WWE and the Ultimate Fighting Championship (UFC), which it already owns, to form a new, publicly listed company valued at more than US$21 billion. Beyond that, Emanuel sees the transaction as a “rare and compelling” opportunity to grow Endeavor’s global business.

As the sports and entertainment industry reacts to the deal, SportsPro unpicks the key details of the agreement and outlines what it means for Endeavor, WWE and the UFC.

How did we get here?

Having exited as WWE chief executive last July, the wrestling promotion’s controlling shareholder Vince McMahon returned at the start of 2023 to oversee a potential sale. Media conglomerate Comcast and Saudi Arabia’s Public Investment Fund (PIF) were linked with a deal before Endeavor, which has represented WWE through the William Morris Endeavor (WME) and IMG agencies, emerged as the frontrunner.

Mark Shapiro, Endeavor’s president, did little to play down the company’s interest last year even before McMahon, who bought WWE from his father in 1982, sought a sale.

“We’ve shown [Wall Street] and frankly, everybody else in the industry that cares, what we can do when you put the UFC on top of the Endeavor platform,” Shapiro told The Town podcast in October.

“There are just all kinds of levers we can flip. When it comes to WWE? Yes, that would be something interesting and it would be worth exploring.”

He added: “We are interested in anything in the owned sports properties segment.”

Vince McMahon returns to WWE as executive chairman of the new company

How much is the deal worth?

According to Endeavor, the acquisition gives WWE an enterprise value of US$9.3 billion. When reports emerged in January saying that the promotion was up for sale, the company had a market capitalisation of more than US$6 billion, with its stock rising by nearly 17 per cent.

The transaction, which is expected to close by the end of the year, will see Endeavor own a 51 per cent stake in the new company, currently referred to as ‘NewCo’. Existing WWE shareholders will control the remaining 49 per cent.

NewCo will trade on the New York Stock Exchange (NYSE) and is to be capitalised with US$150 million cash at closing. The company’s financials will be consolidated by Endeavor.

Who is in charge?

Emanuel will serve as chief executive of NewCo, with Shapiro named president and chief operating officer of the business. McMahon, who stepped down from WWE last summer amid a sexual misconduct scandal, returns as executive chairman. WWE chief executive Nick Khan will be president of the wrestling business, while UFC president Dana White continues in the same role.

Endeavor’s chief financial officer Jason Lublin, the UFC’s chief operating officer Lawrence Epstein and Andrew Schleimer, who has been appointed NewCo’s chief financial officer, will also be part of the senior management team.

NewCo’s board of directors will be made up of 11 members whose identity will be confirmed at a later date, with six of them to be appointed by Endeavor and five by WWE. Each will include three independent directors.

The UFC and WWE could seek a combined streaming agreement

Why did Endeavor buy WWE?

In an investor presentation outlining the rationale for buying WWE, Endeavor described NewCo as an opportunity to run a ‘pure-play IP ownership company operating in some of the most attractive parts’ of the sports and entertainment ecosystem. The chance to own two world-renowned combat sports properties and house them in a single company was seemingly too big to ignore.

Ultimately, the plan is to leverage Endeavor’s ‘flywheel’ to create multiple additional avenues for WWE to grow in the future, which is something it has already been able to deliver for the UFC. The mixed martial arts (MMA) promotion’s enterprise value has risen from US$4.1 billion to US$12.1 billion since being bought in 2016 and is now the central pillar of Endeavor’s owned sports properties segment, which also includes Professional Bull Riders (PBR), Euroleague Basketball and the Madrid Open tennis tournament.

It is also worth mentioning WWE’s upward financial trajectory, which no doubt appealed to Endeavor. The wrestling juggernaut pulled in a record US$1.3 billion in revenue for 2022, of which US$1 billion came from its media operation. Record revenue is forecast again for this year.

Outside of financials, WWE holds more than 200 events annually spanning over 180 countries and claims to have a young, diverse fanbase of 1.2 billion, as well as reaching more than one billion households.

Ari Emanuel has been named chief executive of NewCo

“These are two iconic and category-defining brands that are highly complementary,” Shapiro said this week during an official webcast discussing the deal. “They are best in class in their ability to create and distribute premium, live and original content.”

Shapiro also described NewCo as a “highly attractive financial platform”, one which has the potential to drive double-digit revenue growth, high adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) margins, and free cash flow generation at scale.

“The cards lined up now,” Khan told OutKick, when asked why WWE decided to sell up. “It was a fulsome process with multiple offers, multiple suitors. But we got the right offer, at the right time, with the right partner.

He continued: “Endeavor made the best overall bid for the two things we were looking for: growth of the company and to do right by our shareholders. We think we hit those. Let’s see.”

Endeavor also asserts NewCo has ‘differentiated attributes’ to rival sports properties. Among those are control of all rights, including operational and competition decisions, and year-round live content. Essentially, Endeavor feels it has the complete package with NewCo.

What can we expect from NewCo?

Endeavor probably won’t feel the need to rock the boat given that WWE is hardly an ailing property in need of saving, but it has already identified several additional revenue-generating opportunities for the combined company.

Those have been broken down into the four areas of maximising media rights value, enhancing sponsorship opportunities, accelerating brand and talent placement, as well as product licensing, and developing new forms of content.

Whether that means someone like Conor McGregor showing up at WrestleMania remains to be seen, but there will no doubt be scope for cross-promotion to drive brand awareness and deepen penetration with the two properties’ combined global fanbase, which Endeavor estimates to total more than 1.7 billion. Shapiro himself has outlined a desire to build a “super-fan community”.

The first opportunity to drive revenue will come through upcoming media rights renewals. For context, Endeavor notes the average growth in annual rights value for the National Football League (NFL), the National Hockey League (NHL) and Major League Soccer (MLS) has nearly trebled in recent years.

Indeed, the WWE-UFC merger means the pair will likely have more leverage when rights negotiations get underway. Incumbent broadcast partners such as Disney and Fox will be in contention but could face competitions from streaming platforms that have increasingly been bidding for live sports.

As for how the rights might be packaged, Khan told Axios that WWE and the UFC will hold separate negotiations for linear TV rights, but there could be an opportunity to pursue a combined streaming arrangement. The wrestling promotion’s existing pact with NBCUniversal’s Peacock expires in 2026 and the UFC’s tie-up with ESPN, which includes ESPN+ having exclusive rights to its pay-per-view (PPV) events, ends in 2025.

The newly-established live sports and entertainment company has been valued at more than US$21 billion

What does the future look like?

There will be a clearer picture of NewCo in 2024 once the deal is officially wrapped up and both properties are integrated. Given the current strength of the WWE and UFC products it seems unlikely that anything will change much from a visual perspective, but the existing operational capabilities of both companies means NewCo should be able to hit the ground running to achieve Endeavor’s business goals.

Away from that, there is more to ponder. In terms of the company’s structure, Khan told Axios he was “not sure” about layoffs or staff changes, though more should come to light in the next few weeks.

Closer bonds between WWE and the UFC could also fuel the debate around the latter’s pay structure for athletes. Top fighters take home millions and get a cut of PPV buys, but those lower down the pecking order earn around US$10,000 per show plus a US$10,000 bonus if they win. Critics feel the disparity is excessive and earning potential builds too slowly. The model has helped morph the UFC into a multibillion-dollar organisation, but fighters may now expect to receive a bigger cut.

For Khan, NewCo represents an “an untapped, scripted and unscripted, opportunity in the intellectual property space” and fans “can expect bigger and better”.

“We’ll take a look at every opportunity out there,” he added.

The WWE and UFC’s bold, aggressive approaches have already established them as leading global properties in their respective fields. Now fighting out of the same corner, the industry and fans alike will be watching to see what they can deliver together.

“The Endeavor management team has a long history of working together,” says Shapiro. “We are proven value creators.

“Now we are excited to work together with WWE to execute on this significant value creation opportunity.”

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