SCHEDULE 13D: Endeavor Bolsters TKO Holdings with Significant Share Purchases and Strategic Asset Integration

Endeavor Group Holdings, Inc. and its affiliates have increased their beneficial ownership in TKO Group Holdings, Inc. to 54.7% through recent share acquisitions and are planning further strategic integration of key sports and entertainment assets.

Summary

• Endeavor Group Holdings, Inc. and its affiliates (Reporting Persons) beneficially own 93,380,056 shares of TKO Group Holdings, Inc. Class A Common Stock, representing 54.7% of the class.
• This ownership includes 89,616,891 TKO OpCo Units acquired on September 12, 2023, as part of the TKO Transaction (merger of UFC and WWE).
• WME IMG, an indirect subsidiary of Endeavor, purchased 1,642,970 shares of TKO Class A common stock from Vincent K. McMahon on April 9, 2024, at $89.01 per share, totaling $146.2 million.
• From December 11, 2024, through February 5, 2025, WME IMG purchased an additional 182,060 shares of Class A Common Stock for approximately $26 million.
• From December 13, 2024, through February 5, 2025, Endeavor Operating Company, LLC (EOC) purchased 1,938,135 shares of Class A Common Stock for approximately $291 million.
• The total recent purchases by WME IMG and EOC amount to 2,120,195 shares for approximately $317 million, funded by available working capital.
• The Reporting Persons acquired these securities for investment purposes and intend to continuously review their investment in TKO.
• They may acquire additional securities, retain, or sell existing holdings, and may engage in discussions with TKO management, Board, and stockholders regarding extraordinary corporate transactions such as mergers, reorganizations, take-private transactions, asset sales or acquisitions, changes to capitalization or dividend policy, or changes in management or Board composition.
• January Capital HoldCo, LLC entered into a Margin Loan Agreement on September 13, 2024, allowing it to borrow up to $2.25 billion, secured by 83,074,858 TKO OpCo Units and corresponding Class B Common Stock shares.
• EOC entered into an Asset Sale Transaction Agreement on October 23, 2024, to contribute the Professional Bull Riders, On Location, and IMG businesses to TKO in exchange for 26,139,590 TKO OpCo Units, with closing expected in the first half of 2025.
• EOC also entered a Rule 10b5-1 Trading Plan on December 17, 2024, to purchase up to $900 million of Class A Common Stock until March 31, 2025, or until certain conditions are met.

Sentiment

Score: 7

Explanation: The filing indicates a strong, ongoing strategic commitment by Endeavor to TKO, evidenced by significant share purchases and plans for further integration through asset sales. While the margin loan introduces a financial leverage component for a subsidiary, the overall tone is one of strategic consolidation and potential value creation, suggesting a positive long-term outlook for TKO under Endeavor's majority ownership.

Positives

• Endeavor's increased beneficial ownership to 54.7% demonstrates a strong commitment and confidence in TKO Group Holdings.
• Significant share purchases by Endeavor affiliates (WME IMG and EOC) totaling approximately $317 million indicate a positive outlook and strategic investment.
• The planned Asset Sale Transaction will consolidate key sports and entertainment businesses (Professional Bull Riders, On Location, IMG) under TKO, potentially enhancing TKO's market position and operational synergies.
• The Rule 10b5-1 Trading Plan to purchase up to an additional $900 million in TKO Class A Common Stock signals continued strategic investment and potential support for the share price.

Risks

• January Capital HoldCo's Margin Loan Agreement for up to $2.25 billion, secured by TKO OpCo Units, poses a risk to January HoldCo; a default could lead to lenders foreclosing on the pledged TKO OpCo Units, potentially altering beneficial ownership.
• The stated intent of Reporting Persons to consider or explore extraordinary corporate transactions (e.g., merger, take-private, asset sales, changes to capitalization/dividend policy, management/Board changes) could introduce uncertainty for existing shareholders.
• Restrictions on EDR subscribers' ability to transfer shares exist until September 12, 2025, requiring approval from a majority of WWE Designees for certain transfers.
• After September 12, 2025, transfers resulting in a third party controlling 25% or more of TKO's voting or economic interests require WWE Designees' approval or a pro rata offer to other securityholders.
• Endeavor and its controlled affiliates are restricted from acquiring over 75% beneficial ownership or effecting a sale with a disproportionate 'control premium' without the approval of a majority of independent directors of the Board.

Future Outlook

Endeavor Group Holdings, Inc. and its affiliates intend to continuously review their investment in TKO Group Holdings, Inc. They may acquire additional securities, retain or sell existing holdings, and are open to engaging in discussions with TKO's management, Board, and stockholders regarding potential extraordinary corporate transactions, including mergers, reorganizations, take-private transactions, asset sales or acquisitions, changes to capitalization or dividend policy, or changes in management or Board composition. The Asset Sale Transaction, which will integrate Professional Bull Riders, On Location, and IMG businesses into TKO, is expected to close in the first half of 2025. Additionally, Endeavor Operating Company, LLC plans to purchase up to $900 million of TKO Class A Common Stock under a Rule 10b5-1 Trading Plan until March 31, 2025.

Management Comments

• The Reporting Persons acquired the securities for investment purposes and intend to review their investment in the Issuer on a continuing basis.
• Any actions the Reporting Persons might undertake may be made at any time and from time to time without prior notice and will be dependent upon an ongoing evaluation of the Issuer's business, financial condition, operations and prospects, price levels of the Issuer's securities, general market, industry and economic conditions, the relative attractiveness of alternative business and investment opportunities, and other future developments.
• The Reporting Persons intend to acquire additional securities of the Issuer and may acquire additional securities or retain or sell all or a portion of the securities then held, in the open market or in privately negotiated transactions.
• The Reporting Persons may engage in discussions with the Issuer's management, the Board, and stockholders of the Issuer and other relevant parties or encourage, cause or seek to cause the Issuer or such persons to consider or explore extraordinary corporate transactions, such as a merger, reorganization or take-private transaction that could result in the de-listing or de-registration of the Class A Common Stock; sales or acquisitions of assets or businesses; changes to the capitalization or dividend policy of the Issuer; or other material changes to the Issuer's business or corporate structure, including changes in management or the composition of the Board.

Industry Context

This filing highlights Endeavor's continued strategic consolidation and investment within the global sports and entertainment sector. As the majority owner of TKO Group Holdings, which comprises UFC and WWE, Endeavor is deepening its integration by transferring additional core assets like Professional Bull Riders, On Location, and IMG businesses into TKO. This move aims to create a more unified and powerful entity in the premium sports and live events space, leveraging synergies across talent representation, event management, media production, and brand licensing. The ongoing share purchases and the explicit mention of potential extraordinary corporate transactions underscore Endeavor's intent to optimize its investment and potentially reshape the future of TKO within the broader entertainment landscape.

Management Changes

Corporate Governance

Related Party Transactions

• WME IMG, an indirect subsidiary of Endeavor, purchased 1,642,970 shares of TKO Class A common stock from Vincent K. McMahon on April 9, 2024.
• The Stockholders Agreement, dated April 2, 2023, between Endeavor and Vincent K. McMahon, grants Endeavor a right of first offer in respect of the transfer of Mr. McMahon's shares of TKO common stock.
• The Asset Sale Transaction Agreement, dated October 23, 2024, is between EDR Parties (Endeavor Operating Company, LLC and IMG Worldwide, LLC, both Endeavor affiliates) and TKO Parties (TKO Operating Company, LLC and TKO Group Holdings, Inc.).

Stakeholder Impact

• **Shareholders**: Potential for increased share price stability due to the majority owner's continued investment and strategic focus; potential for significant corporate transactions (e.g., merger, take-private) could lead to liquidity events or changes in ownership structure; potential for changes in dividend policy or capitalization.
• **Employees**: Potential for changes in management or corporate structure if extraordinary transactions occur, particularly with the integration of Professional Bull Riders, On Location, and IMG businesses into TKO.
• **Customers/Suppliers**: Potential for changes in business operations or strategic direction if extraordinary transactions occur, especially with the consolidation of additional sports and entertainment assets under TKO.

Next Steps

• Endeavor Operating Company, LLC (EOC) will continue purchasing Class A Common Stock under its Rule 10b5-1 Trading Plan until March 31, 2025, or until an aggregate purchase amount of $900 million is reached.
• The closing of the Asset Sale Transaction, involving the contribution of Professional Bull Riders, On Location, and IMG businesses to TKO, is expected to occur in the first half of 2025.
• The Reporting Persons will continue to review their investment in TKO Group Holdings, Inc. on an ongoing basis.
• Reporting Persons may engage in discussions with TKO's management, Board, and stockholders regarding potential extraordinary corporate transactions, including mergers, take-private transactions, asset sales, changes to capitalization or dividend policy, or changes in management or Board composition.

Key Dates

Recommendation

Keywords

TKO Group Holdings, Endeavor Group Holdings, SEC filing, Schedule 13D, beneficial ownership, UFC, WWE, sports entertainment, media, talent representation, live events, corporate governance, stock purchases, asset sale, Rule 10b5-1 plan, margin loan