Opinion: Endeavor Filings Reveal a Separate UFC IPO is Real Possibility

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By Patrick Auger
Aug 9, 2019

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Editor’s note: The views and opinions expressed below are those of the author and do not necessarily reflect the views of Sherdog.com, its affiliates and sponsors or its parent company, Evolve Media.


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On Aug. 2, the Wall Street Journal reported that Ultimate Fighting Championship parent company Endeavor had pushed back their IPO offering until September at the earliest. The reason given was that the company was currently in the middle of acquiring On Location Experiences LLC, a premium hospitality company that caters to live event experiences (think UFC VIP Experience type offerings) as well as a “material weakness” in their internal controls over financial reporting. While it would make sense for the company to wait until the acquisition is complete so that they could report stronger Q2 financials and hopefully boost the price of the IPO, the issue with the financial controls could become an issue depending on what the specific problem is, though internal sources seem to indicate its not a showstopper.

While Endeavor’s IPO has been on the radar of mixed martial arts fans for quite some time and will no doubt have an impact on the UFC, buried in the filings of the public offering is an interesting bit of information that only a few fans and pundits have seemed to notice -- there are mechanisms in place for the UFC to be offered in its own IPO.

The section of the filing that discusses a separate UFC IPO reads as follows:

“The UFC LLC Agreement also contains provisions relating to an initial public offering of UFC, which provide that (i) prior to February 18, 2019, an initial public offering of UFC may be requested or approved by at least one director designated by each of us, Silver Lake Partners and KKR, (ii) after February 18, 2019 but prior to August 18, 2021, an initial public offering of UFC may be requested or approved by at least one director designated by each of us, Silver Lake Partners and KKR, provided that a request or approval by any two of the directors designated by each of us, Silver Lake Partners and KKR is required if the valuation in the offering achieves a specified valuation, provided that the approval of the director designated by us is required under all circumstances prior to August 18, 2021, so long as we hold a majority of the equity entitled to appoint directors of UFC, and (iii) after August 18, 2021, any of us, Silver Lake Partners or KKR, subject to certain ownership requirements, may exercise a demand right with respect to an initial public offering without approval by us or our director designees. Any initial public offering undertaken pursuant to the UFC LLC Agreement must be completed in accordance with the agreement.”

What this language essentially says is that if Endeavor or the two minority shareholders of the UFC, Silver Lake Partners and Kohlberg Kravis Roberts (KKR), decide they want the UFC to go public, as long as certain requirements are met they have a legal right to force the UFC to do so. As we’re already past Feb. 18, 2019, subsection (i) is no longer applicable, but areas (ii) and (iii) are still very much in play. From now until Aug. 18, 2021, an IPO for the UFC is possible if at least one director from Endeavor, Silver Lake, and KKR requests or approves it (three total), but if the valuation reaches a certain dollar amount it only requires approval from any two directors (although if Endeavor holds the majority of shares as they do now, the Endeavor director must approve it no matter what the circumstances are). After Aug. 18, 2021, Endeavor, Silver Lake, or KKR can demand that the UFC go public without approval from any of the other groups or its directors depending on the specifics of the UFC LLC Agreement and ownership rights.

Read more at https://www.sherdog.com/news/articl...s-Real-Possibility-159885#0ERuSOGgdLwsVlJS.99
 
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