It’s sure nice to have friends like Silver Lake managing partner Egon Durban.
The deal unwinding the grand vision of Endeavor as a publicly-traded, global entertainment company, the terms of which were announced on Wednesday, includes huge potential paydays for co-founders Ari Emanuel and Patrick Whitesell along with COO Mark Shapiro.
Even in the overstuffed, overpaid compensation packages of Hollywood CEOs, the payout for Silver Lake taking Endeavor private at a $13 billion valuation and selling off its assets — just three years after taking the company public — was remarkable.
* Endeavor CEO Emanuel gets a $25 million bonus payment if certain assets get sold, 2.5% of the quarterly net cash profits from WME going forward, more equity in the company. And a plane.
* Executive chairman Whitesell gets the same 2.5% cut of the quarterly net profits of the agency business and will be appointed chairman. If he does not become chairman he gets a lump sum of $60 million. He also gets a plane.
In addition, Durban gave Whitesell $250 million to make investments in media, sports and entertainment through a new company. Why not?
* Endeavor COO Mark Shapiro gets a $15 million transaction bonus, a four-year, $7 million per year employment contract — and up to a $100 million bonus if he successfully sells off the assets of Endeavor.
This all may be par for the course in the tech companies where Silver Lake is known to invest. But it’s eye-popping in an entertainment industry that is going through consolidation and decline. And it’s an incredible potential payday considering the buyback represents the failure of Emanuel’s gambit to build a global, publicly-traded brand from the origins of a Hollywood talent agency.
Since Endeavor went public in 2021, Wall Street could never get its head around what Emanuel was selling. The odd collection of a top-tier talent agency, sports and lifestyle brands and WWE and UFC tournaments never made sense to the Street, which hit the stock price hard even when the company’s results were respectable.
“The assets we have are great assets,” an Endeavor executive told TheWrap on Wednesday. “What Wall Street was failing to see was the connective tissue between them to create value.”
And so it all will be taken apart. Operationally, Endeavor will be reduced to the original asset, the WME talent agency, and will seek to sell off assets like Professional Bull Riders, college sports assets, sports and modeling agency IMG, marketing agency 160over90 and sports betting firm OpenBet.
Meanwhile, the publicly-traded TKO which operates WWE and UFC will remain its own company, which is 51% owned by Endeavor. Emanuel remains CEO of that company, as well as the soon-to-be private Endeavor.
“It is a lot of enrichment for the senior, senior guys,” said a top Hollywood executive who competes with Endeavor. “For people working there a long time, they’re getting some liquidity. Existing shareholders will sell shares for an increase over what the stock price was.”
And as Durban pointed out in the announcement, Emanuel and his team have built a great deal of value over time, acquiring assets to achieve close to $6 billion per year in annual revenue. “Together, we have built and grown Endeavor from $350 million in annual revenue when we first invested in 2012 to nearly $6 billion in consolidated revenue today,” he wrote.
What he did not say is that Endeavor also carries $5.39 billion in debt, the price of purchasing all these assets over the past decade.
The deal itself did not impress Wall Street, as the offer was a “lackluster” $27.50 per share, said a TD Cowen analyst. The price represents a 55% premium to the unaffected share price of $17.72 per share at market close on Oct. 25, the last full day of trading prior to Endeavor announcing a review of strategic alternatives.
“While shy of the $30-$33 range we had expected, Silver Lake’s proposed $27.50 per share appears likely to close, if not by the end of [the first quarter of 2025], then perhaps shortly thereafter,” TD Cowen analyst Lance Vitanza wrote in a note on Tuesday. “Given Silver Lake’s 71% voting position, no other stockholders approval is required, nor is the transaction subject to any financing condition.”
Multiple analysts downgraded Endeavor’s stock on the heels of the announcement.
WME executives who talked to TheWrap on Wednesday said they were thrilled to shed the time-and money-sucking requirements of the public markets and get back to their traditional methods of running a talent agency.
And to outsiders, it seemed like another successful Emanuel power move that enriched him enormously, without necessarily changing the game of entertainment.
Said a rival: “It feels like Ari has done an incredible job for himself and his key guys.”
Lucas Manfredi contributed to this article.