Ari Emmanuel
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Endeavor, owner of WME, IMG and a majority stake in TKO Group, will test the market.
The company announced Wednesday that it is “initiating a formal review to evaluate strategic alternatives for the business.” Endeavor adds that it is not considering selling its shares in TKO, which owns and operates UFC and WWE.
“Given the ongoing discrepancy between Endeavor’s public market value and the intrinsic value of Endeavor’s underlying assets, we believe evaluating strategic alternatives is a prudent approach to ensure we maximize value for our shareholders,” said Ari Emanuel , CEO of Endeavor, in a statement.
In fact, Endeavor executives have made no secret of how the market has valued their company. With CAA selling a majority stake at a valuation of $7 billion and assets such as IMG Academy and Endeavor Content fetching hefty sums, Emanuel, Patrick Whitesell and Mark Shapiro felt that Endeavor would not fetch a fair valuation.
At a Bloomberg conference earlier this month, Emanuel said Endeavor had a “better business” than CAA.
“They were valued at 15 times [revenue] for the agency business. Quint – which is an experiential company, just like my on location company – has just been reviewed about 15 times [in its September sale to Liberty Media]. I just sold IMG Academy, which I had no value for, for $1.2 billion. I sold my production company for a billion dollars and then started a betting business with Open Bet. I don’t get any credit for any of this.
“Actually, I don’t expect it to be 15 times because that’s the private market. It shouldn’t be time and a half,” Emanuel added. “Give me six [times revenue for a valuation]. I have children to feed.”
While talent agency WME is Endeavor’s beating heart and its biggest single revenue generator, the company also owns a number of other businesses, including IMG, sports betting data service Open Bet, on-location live events business, advertising agency 160 Over 90, Professional Bull Riders, the Frieze Art Fair and the Miami Open tennis tournament.
While it’s not immediately clear whether anything in particular has triggered the exploration of strategic alternatives, the company appears to believe that selling parts – or selling parts of it – could create more value for shareholders.
Last month, the company merged its UFC operations with the WWE, forming TKO Group Holdings, also run by Emanuel and Shapiro. Although this stake is not for sale in this review, it added value by spinning off the UFC business from Endeavor’s core business.
“I think this will address some of the dislocation in the stock price, which is the fact that there’s obviously a distortion between the public market value and the intrinsic value of our assets,” Shapiro told THR after the TKO spinoff was completed.