Inside the Financials of the Ultimate Fighting Championship (UFC)
Posted on 05/24/2019
Zuffa Parent, LLC was formed on July 27, 2016, and is headquartered in Las Vegas, Nevada. Zuffa Parent wholly-owns Zuffa, LLC, which is the operating entity for the Ultimate Fighting Championship (UFC). From the period from January 1, 2016 through August 17, 2016, Zuffa (the parent company of UFC) generated US$ 360,875,000 in revenue and US$ 15,520,000 in net income. UFC makes money through pay-per-view programming, subscription video, sponsorships, live event tickets, media rights and licensing, and other mediums.
On March 18, 2014, Zuffa completed a refinancing of its senior secured credit facility with a syndicate of banks led by Deutsche Bank Trust Company Americas, replacing an existing term loan of principal US$ 450.0 million with a term loan of principal US$ 479.5 million.
Sherman Act Lawsuits
Zuffa has five related class-action lawsuits filed against it in the United States District Court for the Northern District of California between December 16, 2014 and March 20, 2015 by a total of eleven former UFC fighters: Le et al. v. Zuffa, LLC, 5:14-cv-05484 EJD; Vasquez et al. v. Zuffa, LLC, 5:14-cv-05591 EJD; Vera et al. v. Zuffa, LLC, 14-cv-05621 EJD; Ruediger et al. v. Zuffa, LLC, 5:14-cv-00521 EJD; Kingsbury et al. v. Zuffa, LLC, 3:15-cv-01324. Each alleges that Zuffa violated Section 2 of the Sherman Act by monopolizing the alleged market for the promotion of elite professional mixed martial arts (MMA) bouts and monopolizing the alleged market for elite professional MMA Fighters’ services.
The Buyout
On August 18, 2016, a buyer group consisting of William Morris Endeavor (WME), Silver Lake Partners, KKR, and other investors that include CPPIB and GIC Private Limited acquired 100% of Zuffa Parent, LLC. The total purchase price was US$ 4.1 billion which includes contingent consideration of US$ 224.4 million with Zuffa Parent, LLC responsible for US$ 22.4 million of the contingent consideration. The remaining US$ 202.0 million of contingent consideration is the obligation of WME. Furthermore, the acquisition was financed through (i) approximately US$ 1.5 billion in new Zuffa common equity issued to WME, Silver Lake Partners, KKR, and certain other investors, (ii) a rollover of common equity valued at US$ 325.0 million by the existing owners of Zuffa, (iii) US$ 360.0 million in new Zuffa preferred equity and (iv) US$ 1.7 billion in net borrowings. A portion of the proceeds from the acquisition were used to pay off in full the Credit Facility and interest rate swap liability on August 18, 2016.