Endeavor Group, Owner of UFC and Miss Universe Pageant, Files for IPO

By Anonymous

Even as Hollywood’s biggest talent agency tries to reinvent itself as an international entertainment and marketing powerhouse, it remains heavily dependent on its business of representing actors, athletes and other creative types, according to a prospectus filed ahead of an initial public stock offering.

Endeavor Group Holdings Inc., in a federal filing Thursday for an IPO, described itself as an umbrella company that is home to “the world’s most dynamic and engaging storytellers, brands, live events and experiences.” The company said it aims to pursue growth by developing, selling and distributing its own entertainment content. Such an expansion would make Endeavor a potential competitor to the same Hollywood studios with which it does business in the course of representing actors, directors and writers.

The company is seeking an equity value of nearly $10 billion, according to people familiar with the terms.

Endeavor’s biggest source of revenue, according to the filing, is its entertainment and sports division, which negotiates media-distribution deals on behalf of more than 150 clients including the International Olympic Committee and National Football League. It also owns the Ultimate Fighting Championship league, Professional Bull Riders rodeo organization and Miss Universe competition.

However, representation, which typically involves collecting commissions made from securing work for individual talent like actors, directors and writers or licensing deals for brands and other media properties, continues to be its most profitable segment, according to the filing.

But Endeavor is looking to diversify, describing itself as a “global entertainment, sports and content company.”

“As the demand for content continues growing, developing new distribution channels to complement our clients’ creative needs is essential,” said Chief Executive Ari Emanuel in an accompanying letter.

In recent years, streaming services like those offered by Netflix Inc., Walt Disney Co.’s Hulu and Amazon.com Inc. have spurred an unprecedented boom in content creation. Soon other major companies such as AT&T Inc.’s WarnerMedia and Comcast Corp.’s NBCUniversal will join the fray.

Endeavor said it has already helped to finance more than 100 films and shows through its Endeavor Content division, including the critically acclaimed movie “La La Land” and television series “Killing Eve.”

Endeavor’s changing business plan has been spurred by the changing landscape in the entertainment industry. As the number of films and television series being made soars, salaries for A-list stars and certain bonuses associated with major television deals have both shrunk. Like Endeavor, other Hollywood heavyweight talent agencies like Creative Artists Agency and United Talent Agency have sought to broaden their interests by producing their own entertainment content.

Regardless of its efforts to diversify, Endeavor’s agency business remains its most profitable. The division in 2018 made $335 million in adjusted earnings before interest, depreciation and amortization, on $1.31 billion revenue. The company’s biggest division, entertainment and sports, made $439.5 million adjusted Ebitda from $2.27 billion revenue.

Endeavor’s digital business division, which offers streaming services on behalf of sports leagues and other clients, lost $45.3 million. The company also spent $178.3 million on items such as corporate overhead.

Overall, Endeavor said its 2018 revenue amounted to $3.61 billion, with net income of $231.3 million and adjusted Ebitda of $551.1 million. The company reported net losses for each of the prior four years.

The company said it had $4.64 billion in long-term debt as of March 31.

Private-equity firm Silver Lake and Japanese conglomerate SoftBank Group 9984 2.03% will be in a position to cash in on investments in Endeavor following a 180-day lock-up period that starts with the IPO. Silver Lake invested $200 million for a 31% stake in Endeavor in 2012 and another $500 million for an additional 20% in 2014. SoftBank invested $250 million for a 5% stake in 2016.

Endeavor’s presence in sports and other live events has reduced its financial risk in traditional entertainment such as film and television, both of which have suffered as a result of the rise of streaming services. Live event viewership, primarily sports, continue to be big moneymakers in the media space.

The company is also positioning itself in the sports-betting market by providing live data feeds for more than 45,000 annual sporting events, it said in the filing. Endeavor hopes this area of the business will grow as legal sports betting expands in the U.S.

The filing lacks specific information on how much money the company seeks to raise, and at what share price, and offered few details for how the company would use the funds, saying simply it would invest in “working capital and general corporate purposes.”

Moving to become both a representative of talent and a producer of content has generated controversy. The main union representing Hollywood screenwriters, the Writers Guild of America, recently instructed its thousands of members to fire their agents in part because Endeavor and other major agencies refused to stop engaging in controversial practices including producing their own content. The union said producing content created conflicts of interest for the agencies, since they are effectively acting as both the writers’ employers and representatives.

Despite the WGA’s criticism, Endeavor has said it can ethically balance representing its talent and producing entertainment, in part because those functions are handled by separate parts of the company. The WGA and Hollywood’s top agencies have yet to resolve the dispute.

Endeavor intends to list on the New York Stock Exchange under the symbol “EDR.”

The Endeavor Agency LLC was founded in 1995 and merged with the William Morris Agency LLC in 2009. In 2014, it acquired the giant sports and modeling agency IMG Worldwide Holdings Inc. In 2016 the company bought Zuffa Parent LLC, owner and operator of the UFC.

—Stephen Nakrosis, Dana Cimilluca and Maureen Farrell contributed to this article.