Ari Emanuel is quietly hammering out a pricey plan to buy the half of Ultimate Fighting Championship that his entertainment empire doesn’t already own, The Post has learned.
The Hollywood super agent’s conglomerate Endeavor — which owns the WME and IMG agencies as well as the Miss Universe pageant — already owns 50.1 percent of the mixed martial-arts giant behind fighters like Conor McGregor and Ronda Rousey.
Now, Emanuel is looking to scoop up the remaining 49.9 percent as he stages a renewed effort to take Endeavor public following a failed IPO attempt a year and a half ago, sources said.
The fresh IPO bid, which is now being led by Morgan Stanley, will likely be filed early next month, sources said. Goldman led the first IPO roadshow, which had Endeavor seeking to raise over $600 before abruptly pulling the plug in September 2019.
The multi-billion dollar UFC buyout will likely require Endeavor to cut pricey deals with buyout firms Silver Lake and KKR, which collectively own 40 percent of the MMA company. Nevertheless, Endeavor execs believe that owning all of the popular combat club would allow them to present a “stronger package” to investors at a time when UFC has proven better able to weather the pandemic than most other live-events businesses, sources said.
According to a person familiar with the deal, Endeavor is looking to sell equity in Endeavor to private investors ahead of the IPO. It will then use those proceeds to buy UFC. Endeavor, which was in debt to the tune of $5.5 billion last year, won’t incur more debt in the process, the source said.
The amount Endeavor is raising could not be immediately determined, nor could the amount it might be willing to pay for the rest of the UFC. A person with knowledge of the situation pegged the company’s valuation at between $6 billion and $10 billion, saying it’s been growing even as the rest of the company shrinks.
“Why didn’t Endeavor do this before? It didn’t think it needed to,” the source said. “It was a potential thing they considered. They thought they would just go public and it would be fine. It’s not going to be that hard, right? They realized the rest of the company is not worth as much.”
The move comes as the majority of Endeavor’s businesses — which rely on Hollywood film and TV production, as well as live events such as sports, music and fashion — have been slammed by pandemic restrictions. The one exception has been UFC, which suffered a two-month hiatus before getting back to broadcasting its bloody mixed martial arts fights — giving Endeavor a much needed jolt to its bottom line.
The MMA promotion company accounted for 80 percent of Endeavor’s overall profit in 2020, Endeavor president Mark Shapiro told Endeavor staffers in a December virtual town hall, sources said. In the same town hall, sources said, Shapiro revealed that the pandemic took a $2 billion chunk out of the overall company’s revenues as earnings plunged 80 percent.
Even pre-pandemic the mixed-martial arts promotion company accounted for a healthy 50 percent of the company’s annual earnings, said a source who pegged UFC’s pandemic profits at between $400 million and $450 million.
“Buying out the remainder of UFC makes for a better investment,” said source said. “The complexity of Endeavor’s business is still there, but the UFC is the crown jewel.”
After its first effort to go public flopped, Emanuel blamed the depressed IPO market, which saw investors tanking shares of newly listed companies like stationary bike seller Peloton and ride-hailing apps Uber and Lyft.
But sources told The Post that the slumping demand for the company’s stock was also due to Endeavor’s unusual mix of assets as well as its hefty $4.6 billion debt load. Investors also griped about the complexities of Endeavor’s tie up with UFC, noting that it would be simpler if the company owned the MMA promotion company outright, sources said.
Endeavor declined to comment.
Initially, Emanuel had been planning to list Endeavor by merging it with a so-called SPAC, or special-purpose acquisition company, sources said. But those plans shifted quickly after management took a look at the math, a source said.
Endeavor executives calculated that a SPAC — which is generally a faster way to go public, as the auditing process is shortened — would cost Endeavor as much as $100 million in fees that would go to the SPAC sponsor.
Those fees would come out of Endeavor investors’ pockets, including Silver Lake, which owns a 35 percent stake in Endeavor in addition to its stake in UFC.
Endeavor, which confidential filed its IPO paperwork with the Securities and Exchange Commission in February, hasn’t completely ruled out a SPAC, one insider said. Still, it’s moving forward with the direct IPO plan on the belief that investors are interested in “direct ownership” of the UFC, sources said.
Consolidating its ownership of UFC has long been on Endeavor’s agenda, and Silver Lake and KKR have been looking to cash out their investments after holding them for more than five years. But the brutal impact of the pandemic on its other businesses accelerated talks.
Likewise Emanuel — the inspiration for the Ari Gold agent character in HBO’s “Entourage” — has been eager to try his IPO luck again as the vaccine rollouts return life to some of Endeavor’s businesses, including the agency business that boasts clients like Oprah Winfrey, Matt Damon and Ryan Reynolds, sources said.
As The Post has previously reported, the pandemic’s fallout forced Emanuel and other Endeavor execs to implement an aggressive $500 million cost-cutting plan, which included massive layoffs, selling off an $80 million stake in Epic Games and other start-ups and securing a $260 million loan.
Endeavor’s valuation is now “significantly lower” than it was when it first tried to go public in 2019, when it was valued at $6.4 billion on the low side, one source said.