In an apparent textbook case of “buy the rumor, sell the news,” World Wrestling Entertainment (NYSE:WWE) stock is declining 6% today. The drop comes after Endeavor (NYSE:EDR), the parent company of the ultimate Fighting Championship (UFC), and WWE announced that they would merge in a deal valued at more than $21 billion.
The Street had expected WWE to sell itself since the beginning of this year, when the company announced that it would weigh “strategic alternatives.” Last week, business news outlets reported that interest in the acquisition of WWE was ramping up.
Details of the Deal
Endeavor and WWE disclosed that they had signed a contract to combine to create a “new publicly traded company.” The name of the new firm has not yet been disclosed. However, its total valuation will be above $21 billion and it will trade under the symbol TKO.
Endeavor will have a 51% stake in the new company, while WWE will control 49% of it. Endeavor’s current CEO, Ari Emmanuel, will retain the same title at the new firm, and WWE’s executive chairman, Vince McMahon, will have the same role at the new company.
Emmanuel is the brother of Rahm Emmanuel, former President Barack Obama’s chief of staff. Vince McMahon is married to Lisa McMahon, who was the administrator of the Small Business Administration under former President Donald Trump. As a result, TKO will have strong connections to both major American political parties.
The companies say that the merger will result in synergies of $50 million to $100 million.
Emanuel Expresses Confidence in TKO Stock
“For decades, Vince [McMahon] and his team have demonstrated an incredible track record of innovation and shareholder value creation, and we are confident that Endeavor can deliver significant additional value for shareholders by bringing UFC and WWE together,” Ari Emanuel said in a statement today.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
