TKO Group, the parent company of renowned fighting brands UFC and WWE, has made a significant announcement regarding its future in the competitive landscape of sports entertainment. On Thursday, TKO Group revealed a monumental deal to acquire three notable sports assets from Endeavor for a staggering $3.25 billion.
This transaction is an all-equity deal that is expected to reshape TKO's footprint in the premium sports market. The assets included in this acquisition are the Professional Bull Riders league, On Location, a sports hospitality company, and IMG, a leading sports content distributor. Each of these properties will not only enhance TKO's operational capabilities but will also facilitate direct participation in the growth opportunities provided by partner leagues and events, thereby promising a lucrative return on investment. Endeavor, which holds a majority stake in TKO, will benefit from this transaction by receiving approximately 26.14 million shares of TKO Operating Co.
Additionally, Endeavor will subscribe to an equal number of class B shares, resulting in an anticipated ownership increase to 59% in TKO post-transaction. This leaves existing TKO investors with a share of 41% of the company’s ownership. Mark Shapiro, TKO's Chief Operating Officer, expressed strong optimism about the acquisition.
"PBR, On Location, and IMG are industry-leading assets that meaningfully enhance TKO's portfolio and strengthen our position in premium sports globally," Shapiro stated. He elaborated on the strategic importance of these assets, noting they will bolster revenue streams and position TKO to seize growth opportunities in critical areas of its sports ecosystem, including media rights, live events, ticket sales, premium experiences, brand partnerships, and venue fees. The deal is expected to close within the first half of 2025, hinging on necessary regulatory approvals.
On the day of the announcement, TKO's shares experienced a significant drop of 7.4%, while Endeavor saw a modest decrease of 1.4%. Additionally, Endeavor disclosed in a filing that the transaction is contingent on a "pre-closing restructuring" and the absence of a "business material adverse effect." In an interesting twist, private equity firm Silver Lake previously announced plans to take Endeavor private, with a deal valued at $13 billion.
When factoring in TKO's value, the acquisition amounted to $25 billion, marking it as the largest private equity-sponsored public-to-private investment transaction in over a decade. This acquisition is on track to close by the end of the first quarter of 2025. Alongside this acquisition news, TKO also declared a $2 billion share repurchase program and initiated a quarterly cash dividend, underlining its strong financial positioning.
The company's stock was trading at 115.64, reflecting a change of -10.37 and a percent change of -8.23..