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Former WWE CEO Vince McMahon’s stunning return to the company he founded has upended the wrestling giant’s fortunes. At McMahon’s prodding, WWE is now leading “a review of its strategic alternatives” as the wrestling giant finds itself grappling with uncertainty.
The question facing WWE shareholders is not only whether McMahon and the company can execute a sale, or who the buyer might be, but also whether McMahon will emerge (to use some wrestling terms) as a “face,” generating outsize value for shareholders and retiring gracefully, or as a “heel,” throwing a wrench into what could otherwise be a smooth process by inserting himself back on top of his empire.
“My belief is that WWE is Vince’s baby, it is his life’s work, and that he wants to continue to play a part in its future, whether that future is as a standalone public entity, or as a part of another organization,” Lightshed analyst Brandon Ross says. “And my guess is that the deal that he does pursue will be one that allows him to continue to have a say in what happens in WWE’s future.”
Using his controlling stake in the company, McMahon on Jan. 5 installed himself and two former executives on the WWE board of directors. The WWE subsequently told investors that it would look into its options, ahead of its media rights negotiations.
But whether McMahon will help or harm any potential dealmaking remains uncertain. While he is the founder, former chief executive and longtime creative force behind the company, there might yet be new details surrounding his resignation last year that could impact a potential deal.
According to copies of letters sent during the Christmas and New Year holidays between McMahon and the WWE board that were reviewed by The Hollywood Reporter, the WWE was wary of McMahon returning in any official capacity.
In a letter to McMahon dated Dec. 27, the WWE board suggested that while the investigation into his conduct at the company was over, there was new information that might still come out. The board wrote that his return to the company “while government investigations into your conduct by the U.S. Attorney’s Office and SEC are still pending would not be prudent from a shareholder value perspective.”
“This determination is based on a variety of factors, including non-public information the Board has become aware of and the risks to the Company and its shareholders of placing a greater spotlight on these issues,” the letter adds.
McMahon retired amid the board investigation, which examined allegations that he had sexual relationships with employees at the company and subsequently paid women millions of dollars as part of their severance packages.
“Bottom line, if Vince’s return is strictly to show his sincere intention to sell the company, while allowing the new management and creative teams to operate at will, we think this is the best possible form of his re-emergence,” Wolfe Research analyst Peter Supino, who has an “outperform” rating on the stock, concluded in a Jan. 5 report. “Given the TV ratings and stock outperformance since stepping down, we understand the board’s hesitation, but if the purpose is to pursue a sale while removing the uncertainty of Vince’s intention for bidders and shareholders, then we welcome the move.”
However, Supino adds, “We also wonder whether Vince will insert himself in management, adding headline risk for a buyer.”
How could that impact a deal? “One possible outcome here is that he determines any offer to be insufficient (either for price or his involvement post-close or for other factors), and decides to stay on as an Executive Chairman,” JPMorgan analyst David Karnovsky wrote in a Jan. 6 note. “One point of concern we heard from investors this past summer was that McMahon’s continued presence could lead to a risk in demand from potential partners, in particular for media rights and sponsorship.”
If there is real risk of more unflattering or inappropriate information coming out, some potential buyers or media partners (Netflix and Comcast come to mind) may prefer not to engage if he’s involved.
McMahon, for his part, told the board in a New Year’s Eve letter that “the special committee of the Board has concluded its investigation and presumably all of its material findings have been publicly disclosed by the Company.”
McMahon’s outsize personality, his role as founder and the tight relationship between the WWE brand and his own brand could, however, make for a nice fit with Endeavor, which led an investment and subsequent acquisition of UFC, which is closely associated with Dana White. And while video of White and his wife slapping each other in a Mexican resort has gone viral (with no response from Endeavor as of press time), there is no indication of obvious disagreement between Endeavor’s Ari Emanuel and the UFC chief, who continues to run the mixed martial arts business.
Indeed, a source speculated that Emanuel is one of the few suitors who would be willing to deal with McMahon, warts and all. Though they added that Endeavor would likely not pursue a deal unless it was assured that the WWE’s head of creative, Paul Levesque (also McMahon’s son-in-law), promised to stick around long-term (Endeavor may also need a partner to help finance a deal of the WWE’s size).
With the WWE so reliant on its creative expertise, it is all but certain that members of the family will need to stick around after any potential sale.
In fact, Supino notes that “WWE’s management contracts include a double trigger clause for any sale requiring the C-suite to stay on for two years in a change of control.”
Vince’s daughter Stephanie McMahon is serving as co-CEO (alongside Nick Khan), while her husband Levesque, who used to perform for the company under the stage name “Triple H” now oversees programming, storylines, and development.
“I want to be very clear that I wholeheartedly believe that WWE has an exceptional management team in place,” McMahon wrote to the WWE board on Dec. 20. “Stephanie, Nick, Paul, and the rest of the management team have my full and unconditional support.”
WWE Buyers: Who’s in the Ring?
Pros NBCUniversal is already the WWE’s biggest rights holder, with big events on Peacock and Raw on USA. IP from the company (The Undertaker, The Rock, etc.) could be adapted for other content or theme parks.
Cons Is the WWE the type of deal Jeff Shell and Brian Roberts really want to do? Or would they hold out for a more ambitious acquisition?
Pros The WWE would fit nicely with the Ari Emanuel-run Endeavor’s other sports properties, and the McMahons would likely remain involved in running the business, just as Dana White is with UFC. Endeavor could leverage WME to create more crossover stars from the WWE roster.
Cons The WWE has a market cap of $6.6 billion (a deal would likely need to be at least $8.5 billion). Endeavor has a market cap of $10.2 billion. It would likely need a financing partner to afford the wrestling promotion. At a time of rising interest rates, the market for debt-fueled M&A appears to be cooling.
Pros The timing of a sale (with media rights set to expire) could bring the streamer, which is seeking to expand its live programming, into the mix. The WWE has global appeal and could work in a number of Netflix major markets. And the IP could be ripe for reimagining in other formats à la Roald Dahl’s stories, whose characters Netflix acquired for movies and TV shows.
Cons With TV rights locked up in other markets and with Peacock, the WWE still has some encumbrances, so Netflix and Ted Sarandos wouldn’t get everything at the start. And is the WWE’s blue-collar IP really the kind of content it wants to own?
Saudi Public Investment Fund
Pros The PIF, overseen by Saudi’s Prince Mohammed bin Salman, covets U.S. entertainment assets (it owns sizable stakes in EA, Activision Blizzard and Live Nation, and its LIV Golf league is causing mayhem for the PGA Tour). With $620 billion in assets under management, buying WWE would be pocket change.
Cons The PIF’s long-term commitment to the U.S. market remains unclear, and the controversy surrounding the fund could hurt the WWE’s ability to find new TV deals (see LIV’s difficulty in selling rights). Also, the PIF might not be able to leverage the WWE IP as efficiently as other possible buyers.
Georg Szalai contributed to this report.
A version of this story first appeared in the Jan. 11 issue of The Hollywood Reporter magazine. Click here to subscribe.
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