Ari Emanuel baits investors to swim with sharks

Sharknado. Endeavor boss Ari Emanuel hasn’t stopped moving. After taking his entertainment group public in 2021, then separating out crown-jewel sports asset Ultimate Fighting Championship, he has now sealed a $13 billion take-private transaction. The trouble is, the deal looks like chum for sharp-toothed buyer Silver Lake.The $27.50 per share all-cash offer, unveiled Tuesday, represents a 55% uplift from Endeavor’s stock price on Oct. 25. That was the day the company behind sports gambling outfit OpenBet and the talent agency representing Matt Damon announced a strategic review. The price might look chunky: Including debt, it comes in at nearly 14 times last year’s EBITDA of $1.2 billion – similar to the multiple that rival group CAA fetched in a transaction involving French billionaire François-Henri Pinault in September.But look closer, and there’s blood in the water. Endeavor and Silver Lake bill this as the largest private equity-led take-private buyout in over a decade. They get there by adding in the value of Endeavor’s controlling stake in TKO, home of the merged UFC and World Wrestling Entertainment, bringing the supposed headline figure to $25 billion.The deal is likely nowhere near that large. Assuming Silver Lake and management roll over their stakes in Endeavor, Egon Durban’s firm only needs around $6.7 billion to pay out to independent investors, Breakingviews calculates. But Durban and Emanuel are right about one thing: the company’s equity value does not seem to reflect the worth of TKO.This wrinkle stems from the late-2023 deal that formed TKO by separating and merging the UFC with WWE, leaving behind a grab bag of assets at Endeavor including a talent agency, professional bull-riding league and art fair. Under the confusing arrangement, Endeavor’s share price sagged. Prior to exploring alternatives, the company’s market value was about $8 billion – barely more than the then-roughly $7 billion value of its TKO stake.Silver Lake and Emanuel can benefit from that aberration. Since it consolidates results from TKO, Endeavor’s profit is set to be much higher this year; the take-private represents a mere 9 times multiple of expected 2024 EBITDA, according to LSEG.A special committee of directors approved the deal, but Silver Lake – which holds voting control – rebuffed a request for a minority vote, Reuters reported. Such votes have been contentious for the buyout shop in the past, like when Carl Icahn agitated for more money when the firm helped take computer-maker Dell private in 2013. This time, investors are left to swim with the sharks.

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Ari Emanuel baits investors to swim with sharks

Endeavor and Silver Lake bill this as the largest private equity-led take-private buyout in over a decade.

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