Details Behind $4 Billion Sale of the UFC to WME-IMG

UFC President Dana White speaks at a news conference after the UFC 177 mixed martial arts event in Sacramento, Calif., Saturday, Aug. 30, 2014. (AP Photo/Jeff Chiu)

In May 2016, ESPN reported that the sale of UFC was imminent. On the Dan Patrick Show, Dana White, the President of UFC denied the claims and did not make a comment on the details reported by ESPN.  What he hinted at was that the company was not being put up for a sale but seeking new ownership. What he meant was that the company was looking to expand within the current regime.  On the Dan Patrick Show, Dana White said “We’re not up for sale. We’re always working on deals and our expansion globally. I’ve been saying since this thing came out, No, we’re not for sale, but let me tell you what. If somebody shows up with $ 4 billion, we can talk. We can definitely talk.”

Dana White could not specifically provide a comment regarding the report or the pending sale of UFC at the time. This can be attributed to the confidentiality that surrounded the deal and the investors plus the current owners at the time did not want to jeopardize the deal.

Where it all began

In 2000, UFC Chairman Lorenzo Fertitta and his brother, Frank bought the mixed martial art company at a total cost of $2 million from Sephamore Entertainment Group. Over time, the two brothers grew the company from a no-holds barred niche to a global empire. Today, mixed martial arts has been regulated in all 50 states in the US. Stages for the fights are available worldwide. Some of its mainstream superstars include Conor McGregor and Ronda Rousey who rose in 2015, but have experienced a few setbacks in 2016.

UFC 200, which was held in Las Vegas T-Mobile Arena, was able to generate $10.7 million for the company. This marked a live gate record for the company. UFC is known to produce more than 40 live events annually. Today, it is the largest pay-per-view content provider in the world and broadcasts to over 156 nations around the world in 29 different languages.

So, what has made UFC to be exciting in 2016?

On Monday July 11th 2016, Ultimate Fighting Championship was sold for a whooping price tag of $4 billion. The company was sold to a group led by WME-IMG, a marketing and talent management firm that is known to represent A-listers in the entertainment industry. The Fertitta brothers, who were the previous owners, will be stepping down from the organization after completion of the sale. Meanwhile, the President of UFC, Dana White, will continue running the organization and he will pocket millions in form of finder’s fee and a hefty yearly contract that will pay him in the range of NFL commission Roger Goodell.

What has been revealed is that the Fertitta brothers will retain a small, passive minority ownership interest while Dana White, 46, will return an undisclosed amount from his 9% stake. After the sale, White will continue to be the day-to-day promoter and the face of the sports company.

Who were the previous shareholders of UFC?

The company had four major shareholders. The Fertitta brothers owned a total of 81% where Frank owned 40.5% and Lorenzo owned 40.5%. Dana White, the current President owned 9%,  The other shareholder is Flash Entertainment which is a subsidiary that is owned by the Abu Dhabi government. The company purchased a total of 10% back in 2010 and still retains the shares even after the sale.

Before the sale to Flash Entertainment, both brothers had a total of 45% while Dana White had 10%. In 2010, they came up with an agreement where the brothers sold 9% (4% from each brother) and 1% from Dana White to Flash Entertainment.

What made the deal possible?

In 2015, UFC was able to make a record setting $600 million in revenue.   This is seen as the main reason why the many investment firms made an offer to the current owners of UFC (Fertitta and White). In 2018, the investors are hoping Fox and ESPN will contest for the new broadcasting rights since the show is now legal in all 50 states and even in New York where it was banned for quite some time. WME-IMG are hoping to make more money from the deal yet to be signed in 2018 than what they made from the 7 year deal FOX has been currently holding.

Furthermore, the company is hoping to expand to China where UFC has yet to become mainstream.

Who are the current investors?

WME-IMG

The group – William Morris Endeavor – International Marketing Group is a large company that merged after WME purchased IMG for $2.4 billion in 2013. The company is known to represent some of the biggest clients who include Oprah Winfrey, Justin Timberlake, Dwayne Johnson, Drake, Rihanna and Matt Damon.

Ari Emanuel is the current co-CEO of WME-IMG and his name is bound to come up in the deal during the sale of UFC. He is the brother to Rahm Emanuel, who is the current Chicago Mayor and a former chief of staff to President Barrack Obama. Patrick Whitsell is also the co-CEO at WME-IMG and will feature greatly in the process.

Other investors include Silver Lake Partners, Egon Durban, Kohlberg Kravis Roberts (KKR) and MSD Capital which is owned by Michael S. Dell. MSD Capital is an investment firm that is associated with the founder of Dell Computers. The company has invested in Dell Inc, Dell Computers and EMC, a cloud computing, information security and data storage company.

KKR is a multinational private equity firm that is known to specialize in leveraged buyouts. It was formed in 1976 by Jerome Kohlberg, Henry Kravis and George Roberts. The investment firm has made several investments in the health care, retail, energy and natural resources industry.

Silver Lake Partners which is associated with Ego Durban, the managing director and managing partner is a private equity firm that has invested in Dell, Go-Daddy and WME-IMG. The investment firm bought a 31% stake in WME making it part of its investment portfolio. The company is based in Silicon Valley and is known to have purchased a controlling stake in Skype for a reported amount of $1.9 billion before selling it to Microsoft for $ 8.5 billion. This sale was completed 2 years after the initial purchase of a controlling stake in Skype.

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