TKO Group, the parent of WWE and UFC, is acquiring PBR, On Location, and IMG for $3.25 billion, all-stock, from Endeavor Group as a boost for TKO in the share of premium sports, further enhancing its portfolio while opening new revenue avenues under its belt as it pushes deeper into media rights, live events, and brand partnerships. Selling the assets is a part of the firm's efforts to go private, in partnership with equity firm Silver Lake, as earlier announced this April.
Leading this deal is Ariel Emanuel, the chief executive officer of Endeavor, who is also the executive chair and CEO of TKO, and was part of the latter company's efforts to cut down its focus and to dispose of assets as privatization looms. Emanuel said that in the growth potential of the acquisition, TKO's consolidated resources were "a big deal in extracting maximum value from growing premium sports market". "This acquisition expands our media capability and strengthens our competitive edge in the premium sports ecosystem," Emanuel said.
Among the assets, Professional Bull Riders became an immediately recognizable brand in live sports entertainment. Hitting more than 200 annual events and reaching a fan base of 1.25 million people, PBR has become a huge player in the world of sports. And impressively, the bull-riding league also flaunts amazing media reach, connecting over 285 million households spread across 65 territories. With PBR, TKO will achieve a huge customer base together with high-profile live events through which it can develop its global influence and strengthen its position in the area of live sports entertainment.
On Location has offered premium experiences for some of the world's most significant sporting events, including the Super Bowl, Ryder Cup, and NCAA Final Four, that are connected with live event services. The latter boasts unique and exclusive experiences for the fan, including a high-end ticketing package. Acquiring On Location will present TKO with a chance to experiment with premium offerings in live sport.
Other revenue streams that complement this acquisition for TKO include an additional layer of exclusivity that is part of its vision for premium sports experiences.
Also acquired as part of Endeavor's subsidiary deal with TKO is IMG. Under the deal, IMG will continue playing a widespread role in the world of sports and media. As a sports content distributor and producer, IMG offers packaging and merchandising of media rights besides brand partnerships and event management. Its client list comprises major leagues and franchises such as NFL and NHL. For example, the company's global media partnership will enable it to distribute sports video content all over the world through its SNTV joint venture with the Associated Press (AP). The industry connections and networks already established through IMG will enable TKO to position itself in a much better place to gain returns on media rights, sponsorships, and content distribution.
PBR, On Location and IMG are really industry-leading assets that meaningfully enhance TKO's portfolio and strengthen our position in premium sports around the world. Within TKO, they'll help power growth in our revenue streams and position us to capture even more upside from some of the most attractive parts of our sports ecosystem," said TKO Chief Operating Officer Mark Shapiro.
The deal structure is such that Endeavor will retain major shareholder status of TKO. Under the deal, Endeavor would receive 26.14 million common units of TKO Operating Co. and subscribe to an equivalent number of shares of TKO Class B shares. In this manner, at the close of the transaction, Endeavor would have acquired about 59% of TKO and the existing TKO shareholders with 41%. This purchase not only strengthens the position of TKO in the market but gets the company ready for sustainable growth with a further increase in the value of the shareholders, said Jefferies analyst Randal Konik.
The TKO Group announced the deal, which is expected to close in the first half of the next year. It also reported a board-approved plan to repurchase common stock worth up to $2 billion. But perhaps it's too much to hope that shares of Stamford, Connecticut-based TKO Group Holdings Inc. fell more than 8% in trading on Thursday, and the decline may simply be the first sign of increased investor vigilance. Analysts remained bullish on the company's strengthening grip on premium sports.