The tens of thousands of fans who gathered at SoFi Stadium in Los Angeles for WrestleMania this weekend got to see wrestling icon John Cena hurled to the canvas by Austin Theory, one of World Wrestling Entertainment’s biggest stars.
But offstage, bankers and executives huddled in stadium conference suites to finalize a new plot for WWE’s future. Endeavor, an entertainment giant run by Hollywood power broker Ari Emanuel, finalized a deal to acquire and merge WWE with Ultimate Fighting Championship, the martial arts league that owns Endeavor.
News of the deal, which aims to create a new public company valued at more than $21 billion, broke Sunday for the second night of WrestleMania, with Mr. Emanuel in attendance alongside Vince McMahon, WWE’s Executive Chairman The Companies announced the deal Monday morning, saying the as-yet unnamed company — whose stock will trade under the symbol “TKO” — would be a juggernaut in live entertainment and martial arts. The deal is expected to close by the end of the year, pending regulatory approval.
“Today watching TV is a rarity,” said Mark Shapiro, president and chief operating officer of Endeavor, who will also fill those roles at the new company. “And unicorns like the UFC and WWE will be in demand.”
In merging Ultimate Fighting Championship with World Wrestling Entertainment, Mr. Emmanuel and Mr. McMahon insists that traditional TV companies and video streaming giants will continue to pay top dollar for the rights to show live events – including scripted and unscripted fights.
Recent live sports deals confirm that. The National Football League in December concluded an agreement with YouTube TV valuing its Sunday Ticket package of games at a whopping $2.5 billion a year — an increase of about $1 billion from its deal with its previous partner, DirecTV. The National Basketball Association is assuming to greatly increase his fees after his current TV deals expire after the 2024-25 season.
Fierce competition between cable TV and big-pocketed tech companies is behind rising costs. While viewers are leaving traditional television in droves, live events like NFL games and WWE matches continue to draw high ratings, entrenching the cable TV business. And tech giants like Amazon and Alphabet are too use live sports to attract new subscribers to their services, sparking a bidding war with their traditional rivals.
Executives are aiming to leverage the WWE and UFC pairing to capitalize on that demand. UFC’s contract with the ESPN division of the Walt Disney Company expires in the next few years, and WWE’s deal with NBCUniversal’s American network and the Fox broadcast network expires next year.
The combination is the latest in a series of bold deals struck by Mr. Emanuel, the workaholic Hollywood talent agent who has risen from the mailroom to become one of the most important figures in the entertainment industry. Mr. Emanuel will become the chief executive of the new company and retain his CEO title at Endeavor, which will continue to own other companies, including the William Morris Endeavor talent agency and the Professional Bull Riding League.
The deal also provides a coda to a tumultuous chapter in Mr. McMahon. He was reinstated as WWE Executive Chairman in January after resigning last year following an investigation into sexual harassment allegations. Mr. McMahon will remain with the new company as executive chairman, serving on an 11-member board of directors that includes six members from Endeavor and five members from WWE
UFC president Dana White will retain that role and WWE CEO Nick Khan will remain president. Patrick Whitesell, the prominent Hollywood executive and agent representing actors including Matt Damon and Ben Affleck, will continue to serve as executive chairman of Endeavor.
The deal places a high valuation on UFC, which Endeavor and its backers bought in 2016 for about $4 billion, and WWE, which was seeking a deal worth about $9 billion. The all-stock deal values UFC at $12.1 billion and WWE at $9.3 billion. Mr. Shapiro said the competitive bidding process justified the “healthy price” for WWE, along with the potential for a lucrative deal in the upcoming rights negotiations.
Endeavor is also betting that the price tag will be justified by companies other than rights. Mr. Shapiro said the company’s ability to sell sponsorships, create new events and close deals with social media companies adds to its value.
The deal for WWE came together quickly. In recent weeks, Mr. Emanuel and Mr. Shapiro have visited WWE’s headquarters in Stamford, Connecticut, and the offices of investment bank The Raine Group in New York City to finalize the details of the deal. On Sunday, as WrestleMania came to a close, Endeavor and WWE finalized the final details.
“It’s been insane,” said Mr. Shapiro, the Endeavor manager.