Giant tech and media investor Silver Lake, which is Endeavor’s largest shareholder, said it plans to propose taking the company private after Endeavor CEO Ari Emanuel announced it is evaluating “strategic alternatives.”
“Silver Lake is committed to strategies that deliver value for all shareholders of Endeavor. To that end, Silver Lake is currently working toward making a proposal to take Endeavor private. Silver Lake firmly believes in Endeavor’s business and is not interested in selling its shares in Endeavor to a third-party nor in entertaining bids for assets that are a part of Endeavor,” the private equity firm said in a public statement.
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Silver Lake owns 71% of the voting power of Endeavor and its co-CEO Egon Durban and Managing Director Stephen Evans are members of the Board’s Executive Committee. “Silver Lake has been a committed investor since 2012 and has made significant investments in Endeavor since then to support its growth,” the firm said. A buyout would follow the recent sale of a majority stake in CAA to Artemis, the family investment firm of French billionaire Francois-Henri Pinault, a deal reported to be about $7 billion.
Going private would also be an about-face for Endeavor, which went public with great fanfare in April of 2021 after a failed attempt in 2019. Emanuel, however, has been talking for some time about the company’s sluggish stock, which he says doesn’t relect the value of its underlying assets, leading to the announcement that Endeavor has initiated a formal review to evaluate strategic alternatives.
It offered no details besides saying that it would not consider “the sale or disposition of the company’s interest to TKO Group,” the parent of WWE and UFC that is majority (51%) owned by Endeavor.
“Given the continued dislocation between Endeavor’s public market value and the intrinsic value of Endeavor’s underlying assets, we believe an evaluation of strategic alternatives is a prudent approach to ensure we are maximizing value for our shareholders,” Emanuel said.
Endeavor’s acquisition of WWE this year and pairing it with UFC to create the publicly traded TKO was in fact designed to boost Endeavor’s share price by putting a market value on its most valuable asset. But the move has proved disappointing. Endeavor’s stock closed at $17.72 today, just pennies above its 52-week low. The shares jumped by a hefty 26% in after-market trading on news of the strategic review.
Cowen analyst Stephen Glagola called the two announcements — by Endeavor and Silver Lake — a “positive catalyst in unlocking non-TKO asset value.” TKO constitutes 82% of Endeavor’s market cap, he said, and his sum-of-the-part estimate values the non-TKO assets at $7.6 billion, or $16 per share, versus $1.5 billion, or $3 a share, at close.
TKO shares launched on the NYSE on September 12 at well over $100. They closed today at $78.64, rising 3% after market.
WWE and UFC both have rights deals heading towards expiration and despite the popularity of their programming have been taking longer than expected to re-up. In an agreement announced in late September, WWE and NBCUniversal agreed to a five-year domestic media rights deal to bring Friday Night SmackDown to USA Network starting in October 2024, exiting its current home on Fox. But the price tag, said to be about $200 million, left Wall Street unimpressed.
Raw, the top-rated flagship property that airs Mondays on USA Network through September 2024, wasn’t part of the deal.
Endeavor stock has suffered in part from what some on the Street call a conglomerate discount: lower relative pricing for companies that own a collection of assets and businesses, even if they’re related, that take more time for investors to understand. Its four divisions include Owned Sports Properties; Events, Experiences & Rights; Representation; and Sports Data & Technology.
“Endeavor has not set a deadline or definitive timetable for the completion of the strategic alternatives review process, and there can be no assurance that this process will result in any particular outcome,” it said today. “The Company does not intend to comment further regarding the review of strategic alternatives until it determines disclosure is necessary or advisable.”
Endeavor is set to report earnings November 8.
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