(Bloomberg) -- TKO Group Holdings Inc. will acquire three sports businesses from its largest shareholder, Endeavor Group Holdings Inc., for $3.25 billion in stock, expanding a portfolio of live entertainment assets that includes Ultimate Fighting Championship and World Wrestling Entertainment.
TKO said Thursday it will acquire the Professional Bull Riders league, On Location, which provides premium hospitality at sporting events, and IMG, a producer and distributor of sports rights and events.
The New York-based company also plans to buy back up to $2 billion of its stock and will begin issuing quarterly dividends of $75 million.
TKO shares fell 5.9% to $118.57 at 9:41 a.m. in New York.
Endeavor and TKO are led by the same two executives — Chief Executive Officer Ari Emanuel and President Mark Shapiro. Endeavor, a leading talent agency, is selling assets as its controlling shareholder, private equity firm Silver Lake, takes the company private. The company plans to sell assets, such as its tennis tournaments, on the open market. TKO, which is focused on live sports, struck Endeavor as a logical buyer for some of its holdings.
Earlier this year, Silver Lake and Endeavor approached TKO’s board about acquiring PBR, On Location and IMG before making them available to other buyers. A special committee, led by Peter Bynoe, reviewed the proposal and recommended the deal, which was approved by TKO’s full board.
“Given Endeavor’s intimate knowledge of TKO and a belief in the strategic merits of the combination, they made a proposal,” Shapiro said.
No other shareholder approval is required, the company said. The deal should close in the first half of next year, after which Endeavor will own about 59% of TKO.
On Location already works with WWE and UFC to create special ticket packages and experiences around its events, while IMG can help advise the two organizations on upcoming media deals. TKO is months away from negotiating a new media rights deal for UFC, which it expects will boost the league’s annual sales, as well as a new deal for one of the WWE’s signature programs.
Shapiro stressed that TKO won’t be buying any other assets from Endeavor, but is open to other acquisitions in the future. Over the last decade, Emanuel acquired dozens of businesses spanning sports, entertainment, modeling, art and advertising. Endeavor acquired PBR for about $100 million in 2015 and On Location for $660 million in 2020.
Emanuel took Endeavor public in 2021. Most of the attention focused on its UFC business, and the company’s share price sagged as investors questioned how all the pieces fit together. Endeavor created TKO through a merger with WWE last year.
Shapiro said he’s constantly being asked questions about returning capital to shareholders. TKO generates hundreds of millions of dollars of cash each year and will use that money to reward its shareholders with buybacks and a dividend.
(Updates with TKO share price change in fourth paragraph)
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