On Monday (3.04), Endeavor Group Holdings announced the merger of two entertainment brands - World Wrestling Entertainment (WWE) and the Ultimate Fighting Championship (UFC) - into one new company worth US$21.4 billion. The merger aims to create a powerful company in the entertainment industry. It will operate under a new name and with greater negotiating power. This could enable it to gain new sponsorship contracts and positions on streaming platforms. Is the investment in this acquisition worthwhile?
A few words about Endeavor Group and WWE
Endeavor Group is an entertainment and sports company offering a wide range of services, including investment consultancy, marketing, talent management, media content production, content distribution, and the organisation and production of sports and entertainment events. Endeavor Group owns brands such as UFC, Professional Bull Riders and Miss Universe, as well as talent agencies including WME and IMG.
World Wrestling Entertainment (WWE) is, like Endeavor, an American entertainment company that specialises in organising and promoting professional wrestling bouts and producing wrestling-related television shows and films. WWE organises regular events: WrestleMania, SummerSlam or Royal Rumble, which attract thousands of fans from all over the world. In addition to wrestling fights, WWE also offers: theatrical shows, cabaret skits or programmes of a documentary nature.
Merger announcement and financial position of the companies
The companies have decided to join forces to create a new company, the name of which is not yet known, in which Endeavor will hold a controlling 51 per cent stake and existing WWE shareholders 49 per cent. The transaction is expected to close in the second half of 2023 and is intended to, among other things, enhance the brand's portfolio. The new company is to be listed on the NYSE under the ticker symbol TKO and will be led by Endeavor CEO Ari Emanuel.
Currently, the net profit margins for both companies for 2022 are: 6.1 per cent (Endeavor) and 15.1 per cent (WWE), with an entertainment sector average of 0.87 per cent. This highlights how effectively the companies are competitive. The merger may further realise the potential to generate profits and increase profitability.
Another big plus is the long-standing ability of both companies to generate positive cash flows from their operations, which is not obvious when it comes to the entertainment industry, whose companies often struggle with transient popularity. For this reason, it seems that the merger could particularly strengthen the already strong position in the entertainment market of both entities.
What does Wall Street think of World Wrestling Entertainment's share price?
Following the announcement of the creation of the new entity, WWE shares rose by more than 13 per cent. According to Market Screener, the company has nine recommendations issued prior to the announcement and they are mostly buy recommendations. The average target price is set at US$106, 9 per cent higher than the last closing price. The highest target price is at USD 111 and the lowest is USD 100.
Source: Conotoxia MT5, WWE, Daily
Grzegorz Dróżdż, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73.18% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
