Shareholders are furious with WWE and Vince McMahon over the result of the merger with UFC and have taken legal action as a result.
Back in April 2023 it was first announced that for the first time in history, WWE would not be independently owned as Endeavor would be the umbrella company for both WWE and UFC, merging the two companies together to create TKO Holdings, with the deal being valued in excess of $21 billion. While the financial value of the transaction is high, this was not the highest offer presented, with many pointing the blame directly at McMahon.
According to The Hollywood Reporter, The suit was filed on November 22nd, where the Delaware Court of Chancery claims that McMahon pushed for a “quick sale” of the company to “close friend and longtime ally” Ari Emanuel. It is stated that the deal was put forward so that McMahon could remain in power and avoid scrutiny in relation to his allegations of sexual misconduct.
McMahon initially announced his retirement in July 2022 as a result of the allegations and would stay away until January 2023, when it was announced that he would be back to orchestrate the sale. Shortly after WrestleMania 39, the announcement of the sale to Endeavor was made official, with Emanuel going on record to say that he couldn’t see a world where Vince McMahon was not directly associated with WWE.
According to shareholders who have filed the suit, it was described as a “conjured up a sham sales process” that would prevent other buyers from placing a bid and would go on to remove Vince McMahon from power. The deal that was closed with Endeavor saw the company sold at $95.66 per share, whereas other offers from undisclosed companies were valued at $95-$100 and $90-$97.50 per share respectively. However, as either of these deals would have led to McMahon’s outsing from his executive position, no counter proposals were made and the Endeavor offer was accepted.
The deal closed with a 51-49 split in favour of Endeavor. Those filing the lawsuit claim that as the deal was rushed and inadequate due diligence was carried out, meaning that investors received an “unfavourable deal.”
McMahon is not the only name targeted by shareholders, with other names listed including CEO Nick Khan, President Frank A. Riddick and Paul Levesque [Triple H], who all received golden parachutes and substantial bonuses upon the completion of the deal.
The full 71-page filing has been posted on Bloomberg Law. It is noted that the lawsuit specifically targets WWE as a whole and not Endeavor or TKO Holdings.
WWE declined to comment on the lawsuit.
Is There A Short-Term Loss But Long-Term Gain For WWE?
Dave Meltzer further analysed the case on Wrestling Observer Radio. Meltzer noted that even though shareholders have not received the highest offer in terms of the initial sale, there will be increased profitability due to the cost-cutting measures implemented and the inclusion of UFC profits:
The gist of the first suit, is that the claim is that WWE got three cash offers that were more valuable than what they said was the Endeavor offer. But in those offers, Vince would have lost power. And they claimed that the first day Vince was back in power, he had immediately called Ari Emanuel. And pretty much, you know, they had, I don’t say brokered the sale, but they talked about, like the whole thing.
And they basically felt that the sales process was not done in the best interest of the shareholders that they did not take the best money offer, because obviously, this Endeavor merger was not a money offer, it was a merger, you know, that, in theory would add value and add the stock, you know, stock value, which it’s not done yet. But that doesn’t mean it won’t in the long run, because it is, the TKO company, is going to be an incredibly profitable company, because you’ve got the UFC profits and the WWE Profits together.
So in the long run, you know, you would think and the ability to cut costs, because people can work with both companies and do the same functions and things like that. So I mean, in theory, you can make the argument, but you know, with the value right now, yeah, the stock value right now is way less than offers that they would have gotten in cash.
Metlzer confirms that McMahon took the lower offer so that he was guaranteed to remain on the Board of Directors in WWE. Meltzer goes on to say that even though the Chairman has lost power following the deal, he is still viewed as one of the top executives, as was seen with Vince McMahon being able to orchestrate a deal between Saudi Arabia and UFC.
Ari gave Vince a more favourable deal only if he would stay there claim is that, you know, the reality was is that he made that deal because he knew he would stay, and the others would not give the guarantee of that. So, and as it turns out, you know, I mean, he’s, he’s still got a lot of power, but his, you know, his creative power is gone. And a lot of his power, you know, Nick [Khan] is running the company, you know, from that standpoint, and Paul Levesque running the creative.
And Vince is out there doing stuff. And he made the UFC deal for the UFC show in Saudi Arabia. So he’s working there, he’s doing stuff, he’s, you know, the number two or three guy in the whole big picture company. But, but a lot, but his power is not what it once was. But I mean, he’s still there.
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