(Bloomberg) — World Wrestling Entertainment Inc. headed for its biggest drop in nearly two years, according to Endeavor Group Holdings Inc. It struck a deal to buy the entertainment conglomerate for $9.3 billion, including debt.
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Endeavor plans to combine WWE with its Ultimate Fighting Championship, or UFC, business to create a new entity valued at more than $21 billion, the companies said in a statement Monday. Existing WWE shareholders will roll over all shares into the new company, which is expected to list on the New York Stock Exchange.
Endeavor will have a 51% controlling interest and existing WWE shareholders will have a 49% interest. Endeavor CEO Ari Emanuel, who has been following WWE for the past few months, is eager to lead the company to merge the wrestling league with the UFC and become the undisputed king of combat entertainment. Emanuel aims to leverage his company’s existing expertise and resources in negotiating media rights and staging shows around the world to increase sales and cut costs at WWE.
WWE shares fell as much as 11% to $81 a share in pre-market trading in New York, the lowest in nearly three weeks. The previous biggest decline at the end of the trading day was 5.8% in July 2021. Shares have risen 33% this year as investors anticipated the sale, giving it a market value of about $6.8 billion. Effort increased by 2.8%.
The two companies said they would each contribute $150 million in cash to the new company.
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“This is a rare opportunity to create a global live sports and entertainment pure game built for where the industry is going,” Emanuel said.
McMahon is the rest
Vince McMahon, the 77-year-old controlling shareholder of WWE, has run WWE for four decades. Even after the deal, he will remain involved in the business, as will the company’s CEO, Nick Kahn. McMahon described the deal as “undoubtedly the best decision for our shareholders and other stakeholders.”
McMahon rejoined himself as executive chairman in January to oversee a strategic review of the company. He left the company last year after it was revealed he had paid millions of dollars to settle sexual misconduct allegations. While he was away, company leadership began discussing strategic options ahead of the next round of negotiations with the companies that broadcast WWE matches on TV.
WWE is a rare gift in the media industry. Although it is scripted entertainment, it offers a live audience to its events like a sporting event. Fox Corp. and Comcast Corp. They pay hundreds of millions of dollars a year for the rights to show matches. The sale is being finalized on the heels of WrestleMania, one of the biggest events on WWE’s calendar. This year’s festival takes place over two days in Los Angeles.
Emanuel and his leadership team over the years have transformed Endover from its roots into a multifaceted media agency representing Hollywood actors. They represent athletes, sell media rights to sporting events and own live events across sports and fashion. They also run a sports-racing technology company.
The company went public in 2021 after fending off an initial public offering in 2019. Its shares closed Friday just 7 cents below the $24 IPO price, giving the company a market value of $11.3 billion.
The UFC is Endeavor’s most valuable asset, and now Emanuel has doubled down on combat sports.
WWE is a business like few others. It is a combination of sports and entertainment. 80,000 fans filled Sophie Stadium in Los Angeles over two nights for the company’s annual wrestling match. Fans cheered the hosts on the outdoor stage during a pre-game show. Many of them sported gold championship belts that cost hundreds of dollars.
IT worker Pedro Calhau from Portugal attended his first wrestling match. He spent $400 on a belt he wore over his shoulder.
“It’s like a soap opera, it’s like theater,” Callhau said outside the stadium. “For us, it’s an exodus.”
He said he thought $9 billion was a fair price, adding, “I hope they give some back to the fans.”
Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC is serving as financial advisors to Endeavor and Latham & Watkins LLP is serving as legal advisor to Endeavor. The Reign Group serves as WWE’s lead financial advisor. JP Morgan and Moelis & Company LLC are also acting as financial advisors to WWE.
–With assistance from Christopher Palmeri and Katie Roof.
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