By Zach Arnold | May 10, 2016
The rumors of Zuffa selling UFC have been hot and heavy, thanks to reporting from Front Row Brian. Private Equity firm Blackstone has long been thought to be the primary buyer in play.
So it comes as no surprise that Darren Rovell’s ESPN report about Zuffa getting ready to sell UFC has stirred up passionate responses from all corners. Dana White has issued a blanket denial about UFC being for sale but the Fertitta family has stayed silent.
According to Rovell’s report:
- God of Wall Street, Goldman Sachs, is representing UFC in sales talks
- The asking price is believed to be in the $3.5 to $4 billion USD range
- Goldman Sachs is reportedly telling buyers that UFC made $200 to $250M USD EBITDA in 2015
- The four finalists in contention to buy UFC are: William Morris/IMG, China Media Capital, Blackstone Group, and Wang Jianlin’s Dalian Wanda Group
It is believed that Jianlin is the leader in the clubhouse. He’s the richest man in Asia at nearly $29 billion dollars. Given his power in China, you could see why buying UFC would be a seductive investment. He would have the political and business clout to clear hurdles in communist China that others do not possess. No Ali Act to worry about outside of America. A favorable legal situation where fighters simply would not have the cash to fight in international courts.
I'm told that Dana White's status actually a negotiating point in at least one of the offers for #UFC. Not everyone keen on him staying on.
— Jonathan Snowden (@JESnowden) May 11, 2016
While Dana White has denied UFC being for sale, he did not deny that Goldman Sachs is representing UFC and he did not deny the $200-250M EBITDA figure.
Why would Zuffa want to sell UFC now?
There are lots of reasons for Zuffa wanting to flip UFC soon.
First, the MMA economy is extremely volatile. One year you have a golden goose and the next year you have a goat.
Second, lawfare. The anti-trust lawsuit is producing illuminating discovery. Depositions are coming soon. UFC is vulnerable. The company is also vulnerable to the kinds of concussion-style lawsuits that plagued the NFL. The difference is that the NFL has already settled their pending cases for a relatively small amount of cash.
Third, the business isn’t as fun of a joy ride as it used to be. The Fertittas put up over $40 million dollars before recovering their investment thanks to The Ultimate Fighter. Ownership has put up with thousands of talent-related headaches that they would have never had to put up with in another kind of sporting venture. UFC was a great way for the Fertittas to meet politicians, celebrities, and rich business leaders. They’ve maxed out on that front. They relied on rich people and entities to do their heavy lifting. There are limits to where they stand internationally.
The fourth and most intriguing reason deals with the Fertitta family wanting to shift into other business ventures. A fascinating connect-the-dots scenario:
If Fertittas sell UFC, wouldn't be surprised to see them try to buy piece of Raiders if team is headed to Las Vegas.
— Darren Rovell (@darrenrovell) May 10, 2016
The Fertittas just did their Red Rock IPO and cashed out big. Now they’re buying out the Palms in Vegas for $312.5 million dollars. But the real main event coming to Las Vegas involves the Oakland Raiders. Sheldon Adelson wants to build a major sports complex. Mark Davis, the son of Al Davis and current Raiders majority owner, is the poorest of the current NFL owners. He’s going to need cash to pull off the move to Las Vegas. Davis has promised to contribute $500 million dollars to the cause.
What’s a better way to get into the elite business inner circle of the NFL than attaching to the Raiders in Las Vegas? Selling off UFC in order to get a piece of the Raiders is a no-brainer business transaction. It would immediately elevate the political and business clout of the Fertitta family and do so in a sport that produces significantly more revenue with fewer headaches than MMA. From the proverbial outhouse to the penthouse.
It is no coincidence that UFC tried to clean up their testosterone scandals with the USADA drug testing program. It is no coincidence that Dana White has taken a back seat publicly. It is no coincidence that fighters have been strapped into the one-size-fits-all Reebok sponsorship model. Cleaning up the loose ends to sell UFC to a private equity firm is the end game. It will be a great Return on Investment for the Fertittas but it does not guarantee an automatically great result for MMA fans:
In most instances, you’re looking at a 5-7 year period where the PE firm wants to grow revenue, reduce costs and get out w/ the FUCK MONEY.
— FrontRowBrian (@FrontRowBrian) May 11, 2016
It won’t be just the folks in Las Vegas popping the champagne corks. The executives at Spike TV will be throwing their own party.
Dana White: The Fertitta's are not looking to buy a football team (Note: They would have to get out of casino business to own NFL team)
— Jason Floyd (@Jason_Floyd) May 11, 2016
There will be an exit strategy. Only a matter of how it is structured.