Ari Emanuel and Mark Shapiro comment on the financial side of the merger between WWE and UFC.
Endeavor's transaction agreement with WWE is now complete, as the deal became official on September 12. As a result, WWE and UFC have merged to form TKO.
Speaking on CNBC's Squawk on the Street, Endeavor CEO Ari Emanuel commented on the news and highlighted the costs involved and the reach of both WWE and UFC.
"We had a range of 50 to 100 with regard to back office and costs. We’re on our way to kind of doing that. We did that with the UFC. We’re on our way here. There’s also savings as it relates to on the production side because of their production facility, our production facility at the UFC. This is a pure sports play. There’s nothing more important than sports content and live events. We do 350 live events with production. We have a billion in fanbase. The global reach of both is incredible, and you can’t underestimate the value of TV rights domestically and internationally, and also the sponsorship. I think the other thing that this does, in addition to just cost-saving, it enables us to kind of have a pure play and people look at EDR properly, where we have some datapoints last week, investing in CAA at 13,15 times. Formula1 buying Quint for 15 times, which is an experiential company. Without UFC inside EDR, everything’s valued at a little less. I think it’ll give everybody a pure play there also. Both companies have about less than three times leverage," Emanuel said.
Endeavor President and COO Mark Shapiro weighed in when asked about Endeavor's status as a free cashflow-generating company. He noted that both WWE and UFC will be juggernauts in that respect. Shapiro specifically pointed to specific figures regarding the cashflow conversion and leverage.
"Both companies will be a juggernaut in that respect. Free cash flow conversion to TKO will be about 61%, and of course Endeavor will be strong. Remember, when this thing started, we were just about eight times levered. Now we’re below a three, so healthy balance sheet, scale, growth, profitability," Shapiro said.
When asked about the return to capital to Endeavor and whether there will be a significant dividend over time, Shapiro stated that the company has already announced their capital return initiative, and he noted that more of that can be expected in the future.
“We’ve already announced our capital return initiative, as you know, a stock buyback program to the tune of $300 million on the Endeavor side, and of course our first dividend, so look for more of that in the years to come," he said.
In another interview, Shapiro said that Endeavor's mission is to capitalize on premium content and live events. Check out his comments here.
Mark Shapiro previously praised WWE's Nick Khan as a relationship guy. Click here to see what he had to say.
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