Endeavor, the owner of WME, IMG and a majority stake in TKO Group, is going to test the market — and is considering going private.
The company said Wednesday that it is initiating “a formal review to evaluate strategic alternatives for the Company.” Endeavor adds that it is not considering a sale of its stake in TKO, which owns and operates the UFC and WWE.
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“Given the continued dislocation between Endeavor’s public market value and the intrinsic value of Endeavor’s underlying assets, we believe an evaluation of strategic alternatives is a prudent approach to ensure we are maximizing value for our shareholders,” said Endeavor CEO Ari Emanuel in a statement.
Private equity firm Silver Lake, a major shareholder in the company with 71 percent of Endeavor’s voting power, added: “Silver Lake is committed to strategies that deliver value for all shareholders of Endeavor. To that end, Silver Lake is currently working toward making a proposal to take Endeavor private.”
The investment firm added: “Silver Lake firmly believes in Endeavor’s business and is not interested in selling its shares in Endeavor to a third-party nor in entertaining bids for assets that are a part of Endeavor.”
Indeed, executives at Endeavor have made no secret of their thoughts on how the market has valued their company. With CAA selling a majority stake at a $7 billion valuation, and with asset sales like IMG Academy and Endeavor Content fetching handsome sums, Emanuel, Patrick Whitesell and Mark Shapiro felt that Endeavor was not fetching an appropriate valuation.
Speaking at a Bloomberg conference earlier this month, Emanuel said that Endeavor had a “better business” than CAA.
“They got valued at 15 times [revenue] for the agency business. Quint — which is an experiences business, same as my business On Location — just got valued about 15 times [in its September sale to Liberty Media]. I just sold IMG Academy, which I got zero value for, for $1.2 billion. I sold my production company for $1 billion and then I have a betting business in Open Bet. I’m not getting any credit for any of those things.
“I actually don’t expect it to be 15 times because that’s the private market. It shouldn’t be one and a half times,” Emanuel added. “Give me six [times revenue for a valuation]. I got kids to feed.”
While the talent agency WME is the beating heart of Endeavor, and the largest single contributor of revenue, the company owns a variety of other businesses as well, including IMG, the Open Bet sports betting data service, the On Location live events business, the advertising creative agency 160 Over 90, Professional Bull Riders, the Frieze Art Fair and the Miami Open tennis tournament.
While it is not immediately clear if anything particular sparked the review of strategic alternatives, the company seems to believe that selling itself for parts — or selling pieces of it — could unlock more value for shareholders.
Last month, the company merged its UFC business with the WWE to create TKO Group Holdings, which is also led by Emanuel and Shapiro. While that stake is not for sale in this review, it did create value by spinning out the UFC business from the core Endeavor business.
“I think this will clear up some of the dislocation in the stock price, which is the fact that there’s obviously a dislocation between the public market value and the intrinsic value of our assets,” Shapiro told THR after the TKO spinoff was completed.
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