By Tiyashi Datta, Dawn Chmielewski and Milana Vinn

(Reuters) – World Wrestling Entertainment Inc will combine with Endeavor Group-owned mixed martial arts franchise UFC to form a new, publicly listed entertainment giant valued at about $21 billion, the companies said on Monday.

The deal unites two of the biggest names in wrestling and entertainment and caps a months-long sale process for WWE, overseen by its co-founder and executive chairman Vince McMahon who returned to the company’s board in January.

“This is a once-in-a-lifetime opportunity to bring together two leading pure-play sports and entertainment companies,” Endeavor CEO Ari Emanuel said in an investor presentation, describing the deal as a “transformational step” for Endeavor.

Emanuel said he would capitalize on Endeavor’s expertise in securing media deals, sponsorships and new forms of distribution to fuel growth at the new company, which he will lead as chief executive officer while continuing in his role at Endeavor.

McMahon will retain his role in the new company, which will be majority-owned by Endeavor with a 51% stake, while WWE investors will own the rest.

WWE, which kicked off a strategic review in January, attracted several potential buyers who put in all-cash bids, but the company favored a tie-up with Endeavor, as an all-stock deal was more attractive due to the potential upside in the share price of the combined entity, according to people familiar with the matter.

Shares of WWE closed down 2.1% at $89.30 on Monday, while Endeavor shares closed 5.9% lower at $22.52. The complex, all-stock structure of the deal surprised investors who were expecting an all-cash transaction, according to analysts and sources familiar with the matter.

“Maybe the ultimate structure of this was not aligned with their short-term thinking of how it might work,” said John Healy, analyst at Northcoast Research.

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Hollywood power broker Emanuel has transformed Endeavor, which has its roots in representing film and television talent, into a sports and entertainment powerhouse with more than 20 acquisitions. He has invested in bull riding events, fashion shows and the Miami Open and Madrid Open tennis competitions.

Endeavor said it would run the same playbook it employed with the UFC, the world’s largest martial-arts organization, improving operating efficiency, negotiating lucrative media deals and striking licensing deals. The UFC has seen its revenue grow by more than one-and-a-half times and its adjusted EBTIDA double since 2017, a year after Endeavor took a controlling interest in the company. Endeavor bought out the remaining shareholders in 2021.

The newly created company would seek to capitalize on consumers’ desire to participate in live experiences – a trend that has resumed since the height of the pandemic – and on their appetite to bet on sports, said Endeavor President Mark Shapiro, who will serve in the same capacity in the new company.

Under the deal that a source said was internally referred to as Project Stunner, UFC and WWE will also contribute cash to the new company so it holds nearly $150 million. 

The agreement values each share of WWE at $106, representing a premium of 16% to the company’s Friday closing and gives WWE an enterprise value of $9.3 billion.

The new company will be listed under ticker symbol “TKO” on the New York Stock Exchange, the companies said. 

McMahon had retired in July last year as the company’s CEO and chair following an investigation into alleged misconduct. Co-CEO Stephanie McMahon, who ran the company on her own when her father exited, resigned a week after he returned in January.

(Reporting by Tiyashi Datta in Bengaluru and Dawn Chmielewski in Los Angeles; Editing by Kirsten Donovan, Tomasz Janowski and Matthew Lewis)

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