Vince McMahon’s coup that paved the way for him to return to the WWE board and merge the sports entertainment powerhouse with Endeavor’s UFC is back in the spotlight, with a lawsuit alleging he snubbed more lucrative offers to the detriment of investors.
The lawsuit, which was unsealed in Delaware Chancery Court on November 22, alleges that McMahon pushed for a “fire sale” of WWE to Endeavor president Ari Emanuel, his “close friend and longtime ally” who proposed an amicable deal that would allow the wrestling mogul. To remain CEO of TKO Group and avoid scrutiny regarding sexual misconduct allegations that could have gotten him fired from the company. According to the complaint filed by investors, WWE board members “conjured up a sham sale” designed to favor Endeavor and “exclude other bidders seeking to exclude” McMahon, ignoring at least two cash offers with better terms.
The complaint details McMahon’s tumultuous tenure as WWE president, which culminated in September with the formation of TKO Group through a $21 billion merger between the UFC and WWE. He returned to the company in January after stepping down as CEO amid a sexual misconduct investigation into $17.4 million in payments to four different women who previously worked at the company. McMahon, as the controlling shareholder of WWE, removed and replaced three then-serving board members with himself and former executives George Barrios and Michelle Wilson.
“If McMahon was found to have breached his duty of loyalty, WWE shareholders could have requested that he be removed from his position as a manager,” the lawsuit said. “Such scrutiny appears to have prompted McMahon to seek a ‘quick’ sale of the company which also allowed him to continue managing WWE.”
On the same day as McMahon’s return in January, WWE announced a review of strategic options. He said in a statement that he wanted to lead any talks about a potential sale or rights negotiations himself. The investors claim he immediately turned to Emanuel, his former agent who “he knew would allow him to remain at the helm” of the combined entity. They say both the process and price point were unfair, claiming there were better deals on the table.
According to the complaint, this included undisclosed companies that made cash offers of $95 to $100 and $90 to $97.50 per share. But because they considered cashing out WWE shareholders and preventing McMahon from renewing his stock, which would have signaled his “complete ouster” from the wrestling business, the board “did not bother to make counterproposals,” the lawsuit states.
Instead, WWE negotiated exclusively with Endeavor, proposing an all-stock deal contingent on McMahon serving as CEO of the combined company, the complaint says. Endeavor eventually agreed, owning 51 percent of the company post-deal with former WWE shareholders owning the remaining 49 percent. Investors claim the merger was completed at $95.66 per share, which is lower than two competing all-cash offers. (WWE suitors are redacted in the complaint. But the companies are described as “major organizations with significant access to capital” that have “compelling reasons to close the WWE acquisition.” One of them likely has “a significant runway to increase its bid” because Huge synergies they could generate by partnering with the company, the suit says.)
“Not only did he secure a future for himself in WWE after the merger, but McMahon also lined his own pockets and those of his loyalists before agreeing to the deal,” the complaint states, which suggests he and former CEO Nick Cahn secured it. The golden parachutes, along with Khan, McMahon’s brother-in-law and WWE chief content officer Paul Levesque (known professionally as “Triple-H”) and WWE president Frank A. Redick who received a combined cash bonus of $25 million.
The lawsuit says the $21 billion price tag undervalues WWE. The investors claim this is “significantly lower than the offers” the board could have received from several other bidders had they “made any effort to negotiate in good faith”.
According to the complaint, McMahon and his allies on the board “timed negotiations” to favor a deal with Endeavor, including by providing early due diligence and background information to the company so it could make an early offer. During the process, WWE only obtained a budget for the UFC’s current fiscal year rather than insisting on a full set of multi-year projections, as is customary, despite agreeing to merger considerations that depended on accurately evaluating the UFC, the suit says. By rushing to secure the merger with Endeavor without conducting adequate due diligence, investors say the board got an unfavorable deal by agreeing to a 51-49 split.
The complaint, filed by the Ohio Retirement Fund, names McMahon, Khan, Levesque, Barrios and Wilson, among others. It contains various claims for breach of contract and seeks to represent all shareholders who cashed out their shares in the merger.
WWE did not respond to a request for comment.
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