Wall Street Praises UFC-WWE Merger Plans, But Investors Not Fully On Board
thewrap.comcombine UFC with WWE to form a new $21.4 billion live sports and entertainment company that will trade under the ticker symbol “TKO.” Expected to close by the end of the year, the deal will see Endeavor shareholders holding a 51% interest and WWE shareholders 49% of the new company.Traders’ response to the announcement was “too bearish,” Citi analyst Jason Bazinet said in a note to clients, according to TheFly.com.Bazinet wrote that some investors were likely looking for an all-cash offer rather than the all-stock deal the companies plan, but said that the stock sank too far.
The remaining Endeavor company “may be the most mispriced,” the analyst wrote. He kept a “Buy” rating on both Endeavor and WWE shares.Benchmark analysts also pointed to the structure of the deal as a concern for investors, noting “the all-stock and somewhat complex transaction was disappointing versus a cash deal consideration.”Bank of America analyst Jessica Reif Ehrlich wrote that investors don’t appreciate the revenue opportunity from the combination of UFC and WWE, predicting that the companies could see more than $200 million in revenue synergies in the first 24 months, according to TheFly.
That bankroll would be in addition to potential domestic rights benefits that could be extracted through new UFC/WWE packages, and also does not count as much as $250 million to $400 million in savings from overlapping costs within the two companies.Ehrlich said the deal brings “knockout growth potential” for Endeavor Group and she kept a “Buy” rating on the stock.
Analysts at Roth MKM said the combination will create a “more attractive content driven growth story,” with double-digit top line growth potential.
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