WWE and the UFC are linking arms, as the companies have announced plans to combine under a new company known as TKO.
The merger between WWE and UFC-owner Endeavor values the companies at a combined total of more than $21 billion. Notably, it values WWE at $9.3 billion, a more than 33% premium over the company’s market cap on Friday.
Shares of World Wrestling Entertainment were down more than 4% Monday morning, and Endeavor shares tumbled nearly 8% to $22.05. The combined company will trade under the ticker symbol TKO on the New York Stock Exchange.
WWE majority owner and executive chairman Vince McMahon will take on the same role at TKO, while Endeavor CEO Ari Emanuel will run the combined company.
“This is a rare opportunity to create a global live sports and entertainment pureplay built for where the industry is headed,” Emanuel said in a statement. “For decades, Vince and his team have demonstrated an incredible track record of innovation and shareholder value creation, and we are confident that Endeavor can deliver significant additional value for shareholders by bringing UFC and WWE together.”
The company claims there are synergies in the range of $50 million to $100 million, primarily through back-office consolidation.
“Given the incredible work that Ari and Endeavor have done to grow the UFC brand – nearly doubling its revenue over the past seven years – and the immense success we’ve already had in partnering with their team on a number of ventures, I believe that this is without a doubt the best outcome for our shareholders and other stakeholders," McMahon said.
The merger impressed Jefferies analyst Randy Konik.
"We like the announced transaction to merge UFC with WWE as it creates a separate contained live sport entity that can maximize long-term value and valuation for shareholders and no incremental debt usage is a major positive in terms of transaction structure,” Konik said in a note to clients.
“In our view, the UFC is in the early stages of its growth trajectory and EDR's expertise in sports, marketing representation, and live events can take WWE's fundamentals incrementally higher.”
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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