WWE and UFC are getting into the ring together.
The wrestling and mixed martial arts leagues announced they will be merging into a new company that will be mostly controlled by UFC parent Endeavor Group (NYSE: EDR). Endeavor will control the business by virtue of its 51% equity in the combination, and 49% of the equity will be held by current WWE shareholders. It will be an all-stock transaction that values the entertainment enterprises at a combined of $21.4 billion, including WWE at $9.3 billion, a 16% premium to its stock price.
The companies announced the deal Monday morning.
The executive leadership of both companies will have a hand in running the new, to-be-named business. Ari Emanuel, CEO of Endeavor, will also be CEO of the new venture. Endeavor president and COO Mark Shapiro will extend those titles to the new business as well.
WWE founder Vince McMahon will become the executive chairman of the board of the new company. Dana White stays as president of UFC, while Nick Khan will be president of WWE.
“You’re bringing together two globally iconic brands and businesses right in the deep center space of sports and entertainment,” Shapiro said in a phone call. “These days, live draws like the UFC and WWE are a true rarity, so we’re excited to bring these to businesses together, which we believe will bring us massive scale when it comes to appointment viewing.”
UFC and WWE generated a combined $2.4 billion in revenue last year, reflecting a 10% growth rate since 2019. The new business—which doesn’t have a name yet, though it plans to trade under the fight-themed ticker TKO—will be seeded with $150 million in cash from both businesses. While the new business won’t include other Endeavor sports properties, it is likely future sports acquisitions will be folded into the UFC-WWE business, Shapiro said.
Immediate stock market reaction to the deal was mixed; WWE saw an 8% drop in pre-market trading Monday, while Endeavor was up about 3%.
Nick Khan, CEO of WWE, said in a phone call that the Endeavor transaction will prove to be the best for shareholders of the multiple offers WWE received during its McMahon-led sales process. “When we looked at all the options, the board of directors, Vince, myself, other upper management, thought that this deal blew everything else out of the water,” Khan said.
For WWE, Khan said the merger will provide benefits including “international media rights, performance centers and we have an untapped, extremely valuable library of intellectual property, plus sales and sponsorships, site fees or subsidies from various cities around the globe for events.”
“Vince and I had a number of conversations, and we believed we could do it [as an independent company], but it would probably take 10 years, and in 10 years Endeavor would have 10 more years experience doing it,” Khan added.
Shapiro said the merger of the two leagues will combine the strengths of both businesses, such as WWE’s reach in social media, with UFC’s and Endeavor’s expertise in monetization of new media. The combined businesses will also benefit from cost savings, which the company initially projects as $50 million to $100 million annually.
Endeavor shareholders will benefit as well, according to Shapiro. Because the new company will be consolidated under Endeavor’s financials as the controlling owner, the addition of WWE effective slashes Endeavor’s debt ratio from four times EBITDA to under three times with a likely move to under two times debt-to-EBITDA by the end of next year, according to the executive.
“Look at F1. We’re more profitable, we have higher revenue growth, better cash flow, conversion and better margins,” Shapiro said. “This is a tremendous story just out of the gate—and that’s before revenue and costs synergies.”
The combined business should also benefit from the relationship with Endeavor’s talent representation arm, William Morris (WME), and its movie and television production arms, Shapiro added. “I can’t stress enough we’re going to look for the Endeavor flywheel and WME to really electrify these two assets.”
The combination is expected to close in the second half of the year. The new entity will have an 11-person board, six appointed by Endeavor and five by WWE. Advisors for Endeavor on the deal are Morgan Stanley, Goldman Sachs and the law firm of Latham & Watkins. WWE is represented by Raine Group, as lead financial advisor; J.P. Morgan and Moelis & Company; as well as law firm Paul, Weiss, Rifkind & Garrison; with McMahon’s legal counsel Kirkland & Ellis.
(This story has been updated with additional information and to accurately reflect the WWE’s value and premium, McMahon’s new title, and the correct spelling of Ari Emanuel’s name.)
