Endeavor completes merger of UFC and WWE, forming TKO Group

In a move that has sent ripples through the sports and entertainment world, Endeavor Group Holdings has successfully finalized the merger of two giants: UFC (Ultimate Fighting Championship) and WWE (World Wrestling Entertainment). This monumental combination, first announced in early April, marks the birth of TKO Group Holdings, a powerhouse entity set to make waves in the industry.

Mark Shapiro, the President and COO of Endeavor, who will retain the same title at TKO Group, expressed his enthusiasm, stating, “We’re ready to fire out of the gate.” With this merger, Endeavor’s leadership team now holds a more influential position in the market. Shapiro emphasized that their primary goal is to fully capitalize on the ever-growing demand for premium content and live events.

TKO Group Holdings, the newly formed publicly listed company, will trade on the New York Stock Exchange under the ticker symbol TKO. It comprises two globally renowned sports and entertainment brands, UFC and WWE, considered “iconic and complementary” in nature. Endeavor commands a controlling 51 percent stake in the new company, while existing WWE shareholders retain a 49 percent interest.

At the helm of TKO, we find Ari Emanuel, the CEO of Endeavor, who will also maintain his position within the parent company. Vince McMahon, the executive chairman and majority shareholder of WWE, assumes the role of executive chairman of the newly forged firm. Meanwhile, Mark Shapiro continues to serve as the President and Chief Operating Officer of both Endeavor and TKO, ensuring a seamless transition.

The financial statistics are impressive. In 2022, the combined revenues of UFC and WWE reached a staggering $2.4 billion, with a robust 10 percent annual revenue growth rate since 2019. This merger follows Endeavor’s strategic expansion into the sporting events sector, primarily driven by UFC and, to a lesser extent, PBR (Professional Bull Riders). Notably, Endeavor acquired UFC in 2016 for a significant $4 billion.

The merger is expected to unlock annual operating synergies ranging from $50 million to $100 million, although some analysts suggest this estimate may be conservative. Shapiro acknowledges the possibility of even greater synergies through meticulous due diligence, particularly concerning production efficiencies, such as satellite trucks and camera equipment. The strategy is to replicate the success of the UFC takeover, which yielded $70 million in cost synergies within two years of Endeavor’s ownership. Consequently, WWE is poised for integration into Endeavor’s extensive global infrastructure.

TKO Group has ambitious plans for growth in both domestic and international media rights, especially as streaming platforms increasingly covet sports content. The company also intends to bolster its content production, expand the number of live events, enhance premium hospitality offerings, and strengthen sponsorship licensing.

Mark Shapiro highlights the comprehensive approach, saying, “We will be optimizing cost synergies while identifying opportunities for revenue growth in under-monetized areas. This encompasses domestic and international media rights, sponsorship and global partnerships, product licensing, live events through ticket sales, venue fees, and premium experiences. Additionally, we aim to expand our international presence, all under the umbrella of the Endeavor flywheel, which will undoubtedly enhance our influence and impact.”

In terms of rights negotiations, discussions are already underway regarding WWE Raw and Smackdown rights, both of which are set for renewal with NBCUniversal and Fox next year. Shapiro conveys optimism about these talks, considering the year-round nature of WWE programming, its significant engagement, broad reach, and appealing demographics.

Beyond the business outlook, Vince McMahon’s involvement has raised some questions. Earlier in June 2022, he “voluntarily stepped back” from WWE amid a misconduct investigation by the company’s board. The probe centered on allegations of sexual relationships with company employees and substantial settlements with women, accompanied by nondisclosure agreements. WWE announced in November that the investigation had concluded.

However, Wall Street analysts predominantly focus on the business potential of the new entertainment juggernaut, emphasizing the scarcity value of premium intellectual property companies in an increasingly fragmented media industry. According to Bank of America analyst Jessica Reif Ehrlich, TKO represents an opportunity to own a quasi-sports league with robust year-round programming and an attractive financial profile. She maintains a “buy” rating and a $32 price target on Endeavor’s stock.

In sum, Endeavor’s latest venture, the merger of UFC and WWE into TKO Group Holdings, has the makings of a transformative force in sports and entertainment. As it takes its place in the market, the world eagerly watches how this dynamic partnership will redefine the industry’s landscape.