The Entourage Cashes In

Mention the name Ari to any fan of media and one’s mind immediately goes to the surname Gold, the irascible and tenacious father figure to the bros from Queens who rode the coattails of Vincent Chase to conquer Hollywood in the beloved HBO series ENTOURAGE.  But it was the real-life Ari on whom Jeremy Piven’s character was based, Endeavor chairman Ari Emanuel, that REALLY conquered Hollywood.  And this week, it was announced that for as successful as he and his company have been on behalf of their clients, some only a notch more talented than Vincent Chase, Ari and his inner circle are far and away the biggest winners.

Per VARIETY’s Todd Spangler:

Endeavor, three years after the sports and entertainment company went public, announced that it has entered into an agreement to be acquired by private-equity firm Silver Lake.

The deal gives Endeavor an equity value of $13 billion, the companies said. According to the parties, the premium to be paid by Silver Lake represents $4.6 billion more equity value to all Endeavor stockholders.

Silver Lake believes that when consolidating all of TKO’s value into Endeavor, the combined total enterprise value of $25 billion will make this the largest private equity sponsor public-to-private investment transaction in over a decade, and the largest ever in the media and entertainment sector,” the companies said in announcing the pact.

Ariel Emanuel, CEO of Endeavor, said: “Since 2012, Endeavor’s strategic partnership with Silver Lake and Egon Durban have been central to our evolution into the global sports and entertainment leader we are today. We believe this transaction will maximize value for all of Endeavor’s public stockholders and are excited to continue to unlock and invest in the growth opportunities ahead as a private company.”

But as THE NEW YORK TIMES’ Michael J. de la Merced reminded in his writeup earlier this week, not everything that Emanuel and Durgan have tried to in that span have turned to, well, gold:

Silver Lake invested in Endeavor in 2012, with Mr. Durban taking a top advisory role. A flurry of acquisitions followed, including IMG, a sports and fashion-focused agency; Professional Bull Riders; New York Fashion Week; and technology for sports betting. 

But some of the bets haven’t exactly panned out. While Endeavor had once hoped to profit from “packaging” — the creation and selling of content that teamed up writers with other clients — a dispute with writers’ unions forced it to sell a majority stake in its in-house studio. Endeavor executives had also hoped that the sale of a majority stake in Creative Artists Agency to François-Henri Pinault, the French luxury mogul, at a rich $7 billion valuation would help lift their own company’s valuation. But Endeavor’s shares drifted down after that deal was announced.

And the components of the TKO Group, comprised of the company’s 2016 acqusition of UFC and its more recent absorption of WWE, are not included in this deal.  As de la Merced pointed out, while Endeavor had thought TKO Group would be a powerful draw for Wall Street investors, shares in the company remain below their debut price. (That company will remain publicly traded.)

So the payday is both a reward for past successes and, as de la Merced also noted, (t)he hope now is that by delisting, Endeavor can continue to make ambitious investments without being second-guessed by public-market shareholders. It will continue to have the backing of Silver Lake, which is effectively doubling down on Mr. Emanuel, Mr. Whitesell and their team.

I’ve been blessed with knowing some of the key lieutenants in Emanuel’s orbit over the years, to a person wonderful, hard-working executives who believe equally in data and integrity and were supported by Emanuel at almost every step.  No doubt their ability to afford really good colleges for their kids and second homes are enhanced today, and I for one am thrilled.  But it appears the entourage itself is now going to be moving at separate paces and directions.  Whitesell will have a new and infused tool chest to play around in, as Spengler also reported:

Silver Lake will invest $250 million of seed equity into a new business to be founded, managed and controlled by Whitesell, according to an Endeavor SEC filing Wednesday. According to the filing, Whitesell’s business will include “(a) investing in and providing services to companies in the entertainment, media and sports industries, (b) developing, producing, financing and exploiting film, television and digital audio visual content, (c) talent management and (d) consulting with other entertainment companies.”

Whitesell has experience being able to handle separations.  Look how well he’s adjusted to his divorce, where his ambitious ex somehow found a way to trade up from even the level of success he achieved. 

And as THE WRAP’s Lucas Manfredi points out, first and foremost on Emanuel’s to-do list will be sitting down with his accountants and some qualified pilots:

As part of the move, he’ll be eligible to receive a $25 million “asset sale transaction bonus” and will be entitled to royalty payments from WME equal to 2.5% of the quarterly net cash profits of the agency representation business of WME and its affiliates, according to a filing with the SEC.  He’ll also receive new equity awards representing an initial award of 2.5%, made up of one-third of options and two-thirds of restricted stock units, and a supplemental award of 0.5% of the equity interests, calculated on a fully diluted basis.  Upon payment of the asset sale bonus, Emanuel will be automatically terminated from the CEO role, though he’ll remain founder and executive chairman of WME and a board member of the private Endeavor. His right to royalty payments will terminate upon the occurrence of certain qualifying sale transactions involving WME.  Additionally, Emanuel will receive ownership of one of Endeavor’s private planes following the effective date of the merger, and the company will pay or reimburse him for reasonable costs and expenses related to the use of it for business purposes.

And I’m willing to wager the pittance I can afford that it’s gonna be a waaaay sweeter ride than this one.

Until next time…

 

 

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