UFC x WWE - Merger Announcement

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There have been rumors for quite some time that that World Wrestling Entertainment, Inc. is for sale. Especially since Vince McMahon came back from his time-out.
That it would be the parent company of the UFC was a big surprise. The first trustworthy source to bring it to my attention was a post on bloodyelbow.com (WWE sale worth as much as $9 billion closing in with UFC parent company Endeavor).

Ultimate Fighting X Pro Wrestling

Timelines of the involved parties in their current form (all of them have longer histories):

1982 Vince McMahon bought the WWE from his father for $ 1 million.
2001 the Fertitta brothers and Dana White bought the UFC from the previous owners for $2 million.
2009 the Endeavor Group Holdings was founded with the merger of William Morris Agency and Endeavor Talent Agency. It is deeply involved in the entertainment industry as representatives of artists, creators and even sports leagues.
2016 the UFC was acquired by Endeavor for $4,1 billion, which translates to an annualized increase (CAGR) of enterprise value (EV) of 66% p.a. since 2001
2023
- the value of the UFC under ownership of Endeavor increased from $4,1 billion to $12,1 billion at an annualized rate of 16% p.a.
- with the acquisition of the WWE by Endeavor, its value will have increased by 25% p.a. since 1982.

Merger Valuation

Pro forma breakdown with numbers from 2022 - Investor presentation pages 6,17,30:


	UFC	WWE	Combined Company
Enterprise Value	12’100	9’300	21’400
Equity Value	9’400	9’000	18’400

Revenue	1’100	1’300	2’400
Net income	389	195,6	584,6
Adj. EBITDA	628,7	384,6	1013,3
Free Cash Flow	489,3	125,7	615

Net income margin	34,1%	15,1%	24%
Adj. EBITDA margin	55,1%	29,8%	41,7%

Adj. EBITDA/EV	0,052	0,041	0,047
Rev/EV	0,091	0,140	0,112

Numbers in $ Millions

Real Fight + Fake Fight = Real Deal or Real Fake?

What could the future hold? On page 18 of the investor presentation, there are annual growth projections for different metrics for their industry, like global live sports revenue, global sports media revenue and global sports sponsorship revenue, which range from 8% to 9% per year from 2022 until 2025.

Let’s assume for the combined company to at least achieve a 10% revenue CAGR and retain margins:


	Combined Company 2022	Combined Company 2025
Revenue	2’400	3’194

Net income margin	24%	24%
Adj. EBITDA margin	42%	42%

Net income	585	767
Adj. EBITDA	1’013	1’342

Numbers in $ Millions

If minimum assumptions of 10% revenue growth, 24% net income margin and 42% adj. EBITDA margin until 2025 come true, net income should be at $767 million and adj. EBITDA at $1342 million.

Media deals for the WWE with NBC Peacock will be up for renegotiation in 2026. The UFC deal with ESPN expires in 2025. This could give a massive boost to future revenue and earnings numbers.

There is wording in the announcement about combining media rights. Could that even mean setting up their own streaming service?

Ownership Structure

Equity stake in the UFC was only possible by buying stock in Endeavor. After the merger it will be possible to own a more focused stake around the themes of fighting, entertainment and live events by directly investing in a company that only contains two premier brands in their sectors.

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