Endeavor Looks to Sell OpenBet, IMG Arena Ahead of Silver Lake’s Take-Private Deal

The company reported a net loss of $253.8 million and revenue of $1.75 billion in its second quarter of 2024

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Endeavor Group Holdings is actively marketing OpenBet and IMG Arena ahead of its take-private deal with Silver Lake, which is slated to close by the end of the first quarter of 2025.

As a result, the businesses, which make up its Sports, Data & Technology segment, are considered “held for sale” and are presented as discontinued operations in its financial results for the second quarter of 2024.

“During this process, these businesses will continue operating as usual,” the company said.

As part of the agreement struck with Silver Lake in April, Endeavor disclosed its intent to transfer, divest or sell certain business units or assets, excluding TKO and any of its subsidiaries and the agency representation business WME.

Endeavor agreed to acquire OpenBet, a sports betting platform from Scientific games, in 2021 for $1.2 billion in a deal comprised of $1 billion in cash and $200,000 in stock. The value of the deal was later revised to $800 million in 2022, which included $750 million in cash and $50 million in stock.

Here are the company’s the top-line results for the quarter:

Net Loss: $253.8 million, compared to a profit of $666.5 million a year ago, which included proceeds from the sale of IMG Academy.

Revenue: $1.75 billion, up 34% year over year, compared to an estimated $1.87 billion expected by analysts surveyed by Zacks Investment Research.

Earnings Per Share: A loss of 70 cents per share, compared to an estimated profit of 59 cents per share expected by analysts surveyed by Zacks Investment Research.

Adjusted EBITDA: $380.7 million, compared to $288.2 million a year ago.

“TKO and PBR benefited from strong consumer demand and engagement during the quarter, and we continued to drive growth in our representation segment,” Endeavor CEO Ari Emanuel said in a statement. “We remain focused on delivering for our clients and partners and maintaining momentum throughout the business as we work toward the close of our take-private transaction with Silver Lake.”

As of the end of the second quarter, cash and cash equivalents totaled $697.7 million and total debt was $5.07 billion, compared to $778.6 million and $5.01 billion in the previous quarter.

The Owned Sports Properties segment, which includes TKO Group Inc., saw revenue grow 162.9% year over year to $894.1 million, while adjusted EBITDA grew 135.9% year over year to $422.8 million.

Segment results were driven by outperformance of marquee live events, including WrestleMania 40, UFC 300 and UFC 303, and new and existing partnerships at Professional Bull Riders and increased revenue from PBR’s team series.

Revenue growth was primarily attributable to the acquisition of WWE in September 2023, which contributed $457 million during the second quarter, and increases at UFC in live event revenue and higher media rights fees from holding one additional numbered event compared to the prior year period, as well as higher site fees and partnerships.

Events, Experiences & Rights segment revenue fell 20.1% year over year to $472.2 million, while adjusted EBITDA came in at a loss of $68.7 million, compared to a profit of $76.6 million in the year ago period.

Segment revenue was primarily impacted by a decrease of $91 million from the sale of IMG Academy in June 2023, as well as by the timing of certain events including the Miami Open. These were partially offset by increases at the Madrid Open and growth from other events including the addition of EXPO Chicago.

The Representation segment, which includes WME, revenue grew 7.9% year over year to $411.4 million, while adjusted EBITA rose 0.2% year over year to $107.4 million.

The revenue growth was primarily attributed to growth in WME’s talent and music divisions and at 160over90, driven by continued recovery following WGA and SAG- AFTRA strikes and continued consumer demand for music tours, partially offset by decreases in WME’s fashion business.

The company will be acquired and taken private by Silver Lake, its majority owner, in partnership with the Endeavor management team and additional anchor investors at an equity value of $13 billion. When consolidating TKO’s value into Endeavor, the private equity firm estimates the company has a total enterprise value of $25 billion.

Under the terms of the agreement, Silver Lake which holds approximately 71% of Endeavor’s voting power, will acquire 100% of the outstanding shares it does not already own, other than rolled interests.Endeavor stockholders will receive $27.50 per share in cash, representing a 55% premium to the unaffected share price of $17.72 per share at market close on Oct. 25, the last full day of trading prior to announcing a review of strategic alternatives. It is also required to declare and pay a dividend of 6 cents per share in respect of each issued and outstanding share of Class A common stock in each calendar quarter prior to closing.

The transaction is subject to the satisfaction of customary closing conditions and required regulatory approvals. No other stockholder approval is required. TKO is not party to this transaction and will remain a publicly traded company.

Endeavor did not hold an earnings call in connection with the Silver Lake transaction.

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