Heralded as the “largest deal ever in the history of sports,” UFC, the fast-growing professional mixed martial arts (MMA) organization, reached an agreement to be acquired by Hollywood mega-talent agency WME-IMG for $4 billion.
The comment on the size of the deal came from UFC Chairman and CEO Lorenzo Fertitta, who along with his brother, Frank, purchased UFC in 2001 for a measly $2 million.
By all accounts, Fertitta is correct in his assessment of the historical significance of the deal in sports. The Los Angeles Dodgers were bought out of bankruptcy for $2.1 billion in 2012, making it the largest sales price on record for a single franchise. Close behind was the $2 billion purchase of the Los Angeles Clippers by former Microsoft CEO Steve Ballmer in 2014.
Back in 2001, MMA featured bone-crushing, blood-smearing action that was dismissed as “human cockfighting” by Sen. John McCain. But as majority owners, the casino-owning brothers will be now paid handsomely in the deal.
UFC’s Don-King-like President Dana White, who also stands to smartly benefit from the sale with a 9 percent ownership stake, was the first one who persuaded his wealthy high school buddies to buy the cage fighting promotion in 2001.
Beyond extensive promotion, the Fertitta brothers and White increased regulation of fighters, streamlined combat rules and instituted drug testing to help legitimize the sport. Many of its competitors in the sport have also been bought out or eliminated. MMA is currently regulated in all 50 states, with a New York debut coming in November, while UFC stages worldwide events and counts Ronda Rousey and Conor McGregor as mainstream sports stars.
The purchase price shows the ability of sports to reach viewers across many platforms, with UFC not only benefiting from its popular live broadcasts, but also video games, merchandise and ticket sales to its live fights.
“The TV ecosystem is evolving and this underscores the cliché that ‘content is king’ — although certain content is more valuable than others,” said Eric Katz, media analyst with Wells Fargo Securities, told the Los Angeles Times. “Sports is appointment-viewing, and generally watched live, and that is why it is becoming more valuable.”
WME-IMG, is a private company with more than 800 owned, operated and/or commercially represented events in entertainment and sports. WME-IMG was also UFC’s operating partner.
The new financial backing from WME-IMG and its marketing reach seem certain to lead to even more growth and global prominence for MMA’s dominant promotion. The UFC already has a full slate of fights scheduled this year, all building toward its long-awaited debut at Madison Square Garden in November after New York legalized MMA earlier this year.
Lorenzo Fertitta said in a statement, “We’re confident that the new ownership team of WME-IMG, with whom we’ve built a strong relationship over the last several years, is committed to accelerating UFC’s global growth. Most importantly, our new owners share the same vision and passion for this organization and its athletes.”
“We’ve been fortunate over the years to represent UFC and a number of its remarkable athletes,” said WME-IMG Co-CEOs Ariel Emanuel and Patrick Whitesell. “It’s been exciting to watch the organization’s incredible growth over the last decade under the leadership of the Fertitta brothers, Dana White and their dedicated team. We’re now committed to pursuing new opportunities for UFC and its talented athletes to ensure the sport’s continued growth and success on a global scale.”
Silver Lake Partners and KKR will join WME-IMG as new strategic investors, along with MSD Capital, L.P. and MSD Partners, L.P. which will provide preferred equity financing.
Upon closing, Lorenzo Fertitta will step down from day-to-day operations, but Frank Fertitta and Lorenzo Fertitta will both retain a passive minority interest in the organization.
UFC President White cashed out at an undisclosed sum for his percentage of the company, then repurchased an undisclosed percentage with WME-IMG. He told The New York Times he will serve as “president, owner and day-to-day [promoter]” for the new ownership group to remain the face of UFC. He added that “nothing will change” regarding his aggressive promotional style.
UFC marked UFC 200 at Las Vegas’ T-Mobile Arena on July 9, generating a company-record live gate of $10.7 million. It produces more than 40 live events annually and is the largest pay-per-view event provider in the world, with broadcasts in more than 156 countries and territories to nearly 1.1 billion television households worldwide, in 29 different languages, according to its statement.
The one brand that continues to benefit from UFC’s growing popularity is Reebok, which in December 2014 reached a six-year partnership to become the exclusive outfitter and apparel provider for the world’s leading mixed martial arts organization. On July 12, a day after the deal was announced, Reebok introduced a new advertising effort starring Ronda Rousey as part of its ‘Be More Human’ campaign designed to encourage consumers to empower themselves through fitness.
In a statement released to the media, Reebok said its partnership is unaffected by the change in ownership. Reebok wrote, “We are continuing to work hard to develop the best possible products for UFC athletes and fans and are extremely excited about the future growth of the sport.”
The size of the deal and MMA’s increasing popularity may also invite greater scrutiny. The NFL and NHL regularly receive attention around the level of violence during games, injuries sustained by players including concussions, and the off-field activities of their athletes, so it wouldn’t be a surprise if the UFC follows suit.
Photo courtesy UFC
