Endeavor Group Holdings is sending three business lines—events arm On Location, media rights division IMG and the Professional Bull Riders circuit—to subsidiary TKO Group Holdings in a $3.25 billion deal.
The transaction, announced Thursday, will see TKO swap 26.14 million shares of its stock for the three business units, resulting in Endeavor increasing its majority stake of the UFC and WWE parent to 59% of equity when the deal closes, expected in early 2025.
At the same time, TKO said it will buy back up to $2 billion of its stock and begin issuing dividends to shareholders, starting with $75 million in a quarterly distribution that will be divvied up among stock owners.
Experiences division On Location is the largest of the businesses to be transferred. In five-year projections for the businesses made in March and disclosed earlier this month, On Location is seen producing more than $1.6 billion in revenue in 2024, including over $1 billion from the Paris Olympics. IMG Media, which does sports marketing and media rights, probably brings close to $700 million in revenue this year, while PBR was seen by Endeavor management as producing $132 million in 2024 revenue in the March projections.
TKO was formed a little over a year ago when Endeavor acquired WWE and spun it off into TKO Group with its UFC division. Mark Shapiro, president and chief operating officer of TKO and president of Endeavor, told analysts in August that originally PBR wasn’t seen as fitting with TKO.
“We were negotiating with Vince McMahon at the time,” Shapiro said, referring to the former WWE CEO during an August conference call. “And from day one, he was only open to doing this merger, if you will, if it was these two properties, period, end of story. So there was no discussion on PBR.”
He added at the time: “TKO is one of the cleanest stories in media. And we don’t want to pollute our story.”
Endeavor is being taken private by Silver Lake as part of a desire to extract the best long-term value from the companies. Shifting the more directly sports-related assets to TKO creates a premium, global sports portfolio, according to the Thursday press release.
After the TKO announcement Endeavor also said it is exploring the sale of tennis’ Miami Open and Madrid Open among other events assets that sit inside IMG. Endeavor said it has no time table for the sales and has retained Raine Group to assist with the process.
Though the fate of Endeavor’s other sports league, EuroLeague Basketball, wasn’t addressed in Thursday’s announcement, a Thursday SEC filing confirmed the league is being transferred to TKO as well.
Unlike Endeavor, TKO has generated momentum in the stock market. TKO shares have advanced 55% this year to $126 a share Wednesday, close to its original valuation at the company’s September 2023 creation. Wall Street sold TKO down on the news in trading Thursday, however. Shares opened trading $7 lower and continued to fall during the morning on the New York Stock Exchange to around $115, a decline of 10%.
The $2 billion share buyback and the quarterly dividend are both moves that should please shareholders. The share repurchase is expected to take three to four years, while the quarterly dividend will commence in March, according to the company.
(This has been updated with additional details throughout the story, and to clarify that EuroLeague basketball was part of the transaction. It has also corrected to clarify the repurchase is expected to take three to four years, not four to five years.)
