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WWE and Endeavor-owned UFC to merge into a $21 billion sports and entertainment company

Updated: Oct 30, 2023




Acquisition Overview


The deal unites two of the biggest names in wrestling and entertainment and caps a months-long sale process for WWE, overseen by its co-founder and executive chairman Vince McMahon who returned to the company's board in January. WWE, which kicked off a strategic review in January, attracted several potential buyers who put in all-cash bids, but the company favoured a tie-up with Endeavor, as an all-stock deal was more attractive due to the potential upside in the share price of the combined entity, according to people familiar with the matter. Endeavour said it would run the same playbook it employed with the UFC, the world’s largest martial arts organisation, improving operating efficiency, negotiating lucrative media deals and striking licensing deals. The UFC has seen its revenue grow by more than one-and-a-half times and its adjusted EBITDA doubled since 2017, a year after Endeavor took a controlling interest in the company.


The newly created company would seek to capitalise on consumers' desire to participate in live experiences - a trend that has resumed since the height of the pandemic - and on their appetite to bet on sports, said Endeavor President Mark Shapiro, who will serve in the same capacity in the new company.


Deal Structure


The transaction values UFC at an enterprise value of $12.1 billion and WWE at an enterprise value of $9.3 billion. The transaction represents a contribution price of WWE of approximately $106 per share (before any post-closing dividend). Additionally, UFC and WWE will each contribute cash to the new company so that it holds approximately $150 million. At closing, Endeavor intends to sweep all excess cash at UFC, and shareholders of the new company (other than Endeavor) are expected to receive a post-closing dividend. 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.


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.


UFC Overview


UFC, which stands for Ultimate Fighting Championship, is a globally recognized mixed martial arts (MMA) promotion company. It was founded in 1993 by Art Davie, Rorion Gracie, and Bob Meyrowitz. UFC has played a significant role in popularising MMA as a legitimate sport and has become the largest and most successful MMA organisation in the world. UFC operates as a promotion company, organising and promoting MMA events where fighters from various disciplines, such as boxing, Brazilian Jiu-Jitsu, wrestling, Muay Thai, and more, compete against each other in a regulated octagonal cage known as the "Octagon." The promotion showcases high-level fighting skills and athleticism while adhering to strict rules and regulations to ensure fighter safety.

Under the ownership of Zuffa LLC, which was acquired by the talent agency William Morris Endeavor (WME-IMG) in 2016, UFC expanded its global reach and continued to grow in popularity. The company hosts events around the world, including major pay-per-view shows, televised Fight Night events, and international Fight Pass events streamed on their digital platform.


UFC has a roster of professional fighters from various weight classes, and many of them have achieved global recognition and stardom. Some of the most notable fighters in UFC history include Conor McGregor, Anderson Silva, Georges St-Pierre, Jon Jones, Ronda Rousey, and Amanda Nunes. In addition to its live events, UFC has also branched out into other areas of business. It produces and distributes its own pay-per-view events, which are major revenue generators for the company. UFC also has a digital streaming service called UFC Fight Pass, which provides subscribers with access to live fights, exclusive content, and a vast library of past events.


Founded: 1993


Number of employees: 1,740


EV: $11.87Bn


LTM Revenue: $5.268Bn


LTM EBITDA: $1.164Bn


Market Cap: $6.938Bn


WWE Overview


WWE, which stands for World Wrestling Entertainment, is a publicly traded American entertainment company primarily known for professional wrestling. It was founded in 1952 by Jess McMahon and Toots Mondt as Capitol Wrestling Corporation (CWC) and later became the World Wrestling Federation (WWF) in 1979. In 2002, it was rebranded as World Wrestling Entertainment (WWE).


WWE has been at the forefront of professional wrestling and sports entertainment for several decades. It has created a unique blend of athleticism, storytelling, and larger-than-life characters that have captivated audiences worldwide. The company produces scripted, choreographed matches and events that combine elements of wrestling, drama, and reality TV. The core product of WWE is its weekly television shows, including "Raw" and "SmackDown," which air live or taped and are broadcast in more than 150 countries. These shows feature a roster of professional wrestlers who engage in storylines and compete in matches to entertain the audience. WWE also produces other programming such as pay-per-view events (e.g., WrestleMania, SummerSlam), documentaries, reality shows (e.g., Total Divas), and a digital streaming service called WWE Network (now integrated into Peacock in the United States).


WWE has a diverse roster of talent, including both male and female wrestlers, known as Superstars. Some of the most prominent Superstars in WWE history include Hulk Hogan, The Rock, Stone Cold Steve Austin, John Cena, Triple H, The Undertaker, and more recently, Roman Reigns and Becky Lynch. Aside from its wrestling content, WWE has expanded its business into various areas. It has a film division, WWE Studios, which produces and co-produces movies featuring WWE Superstars. The company has also ventured into merchandise sales, video games, music, and live events, holding shows in arenas and stadiums worldwide.


Founded: 1952

Number of employees: 890

EV: 8.02Bn

LTM Revenue: 1.26Bn

LTM EBITDA: 332.89M

Market Cap: 7.87Bn


Industry Insight


The sports and entertainment industry is a vast and ever-evolving landscape that captivates audiences worldwide. It serves as a platform where athletes, performers, and artists showcase their talents, entertaining millions of fans across different mediums. With its global reach, the industry has become a powerful driver of cultural, economic, and social influence. Sports leagues, such as the NFL, NBA, and FIFA, generate immense revenue through broadcasting rights, sponsorships, and merchandise sales. Meanwhile, the entertainment sector, including film, music, and live events, continues to innovate and adapt to changing consumer preferences, leveraging technology and digital platforms to engage audiences on a global scale. The industry's impact extends beyond mere entertainment, fostering community engagement, promoting diversity, and providing opportunities for athletes, artists, and professionals alike. As it continues to evolve, the sports and entertainment industry remains a powerful force that shapes popular culture and connects people through shared experiences.


In recent years, the sports and entertainment industry has experienced significant advancements and transformations fuelled by technological innovations. Digital streaming platforms have revolutionized how content is consumed, providing on-demand access to sports events, movies, TV shows, and music. Social media platforms have also emerged as influential channels for fan engagement, allowing athletes, artists, and teams to directly interact with their followers and build strong, dedicated fan communities. Furthermore, the industry has recognized the importance of diversity and inclusion, making efforts to amplify underrepresented voices and create more inclusive spaces. Women's sports have gained greater visibility, and initiatives promoting gender and racial equality have gained traction, reshaping the landscape and challenging traditional norms.



Strategic Rationale


Seeing these two entertainment powerhouses merge seems natural as previous links already existed between both organisations. The first connection relates to the core assets of their businesses - athletes. It’s become quite common to see martial artists becoming wrestlers. UFC’s most iconic female champion Ronda Rousey for instance joined WWE in 2018. Conversely, Brock Lesnar and CM Punk both made their MMA debut after successful wrestling careers. Outside of the ring - or the octagon - both companies happened to collaborate with similar companies, such as Monster Energy or Modelo. The latest example is WWE’s superstar Logan Paul inking a sponsorship deal with UFC for his Prime sports drinks brand.


Furthermore, logistically Hosting events implies renting large and expensive venues, such as The T-Mobile Arena (20,000 seats), in Las Vegas: through the merger, the new entity could benefit from economies of scale by setting up a WWE event the day before a UFC Fight Night. Such events are promoted through social media: combined, both companies boast 355M subscribers on socials. This is more than the NBA (201M), the NFL (96M), and the MLB (40M) put together. However, 40% of the WWE’s subscribers come from Youtube. When it comes to Instagram, the UFC has 31% of its followers on the platform: taking advantage of various social platforms means reaching consumers from different age groups. With MMA perceived as inappropriate for children, wrestling remains a privileged point of contact for younger audiences to engage in combat sports. The merger increases their consumers’ average lifespan.


Long-Term Prospects


According to a presentation by WWE and Endeavor, the new company will cross-promote to drive brand awareness and deepen penetration of their overlapping fan base, which consists of over 700 million UFC fans and 1.2 billion WWE fans worldwide. They also plan to maximise 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.


Fundamentally the products are not going to change, as was ensured by one of the lead wrestlers for WWE – Paul Levesque. Fans have enjoyed what they have deemed to be ‘improved’ storytelling under Levesque’s guidance and this is set to continue in order to provide the best entertainment they can to fans. Moreover, for the UFC especially the pay that the fighters get has been a topic of dispute with many fighters unhappy with the amount they are paid. Yet now with the birth of this new $21 billion huge company, it seems only natural that an increase in pay for the fighters is due.


Written by Oliver Crawford (Balliol College)


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