In a recent development, a pension fund has filed a lawsuit against Vince McMahon and other senior leaders of World Wrestling Entertainment Inc. (WWE), contesting the legitimacy of its $21.4 billion merger with Ultimate Fighting Championship (UFC), the renowned mixed martial arts organization owned by Endeavor Group Holdings Inc.
Allegations Against McMahon
The shareholder lawsuit in Delaware accuses McMahon of leveraging his dominant influence over WWE to engineer an unjust transaction. McMahon, who returned to lead the company earlier in the year after a six-month exile linked to allegations of sexual harassment, is alleged to have disregarded higher offers in favor of a deal with Ari Emanuel, CEO of Endeavor and a longtime friend of McMahon. The lawsuit claims that this maneuver aimed to secure McMahon’s continued control over the wrestling empire amidst rising stockholder discontent and government investigations.
Sham Sales Process
The lawsuit contends that a board comprising loyalists orchestrated a sham sales process to favor Endeavor and exclude other potential bidders who sought to remove McMahon from power. Filed on behalf of former WWE investors by the Laborers’ District Council and Contractors’ Pension Fund of Ohio, the proposed class action argues that this process unfairly gave former WWE investors a 49% stake in Endeavor subsidiary TKO Group Holdings Inc. The transaction allegedly closed in September, five months after the final details were purportedly settled at Wrestlemania 39 in April.
Key Figures and Board Members
The lawsuit also targets key figures involved in the transaction, including McMahon’s son-in-law, Paul Levesque (Triple H), and company president Nick Khan. McMahon and Khan hold positions on the TKO board, with McMahon serving as executive chairman.
WWE’s Response and Endeavor’s Role
Now, WWE has not provided an immediate response to the lawsuit. It is worth noting that Endeavor and TKO are not named as defendants in this legal action.
McMahon’s Legal History
This marks the fourth round of shareholder allegations against Vince McMahon in Delaware’s Chancery Court, a prominent forum for M&A disputes. Previous legal battles included disputes related to WWE’s broadcast licensing deals with Saudi Arabia and financial entanglements involving McMahon and the XFL minor league football organization.
McMahon’s Tactics and Unfair Process
The lawsuit alleges that McMahon, wielding unchecked power at WWE, used his majority stake to push the merger through without seeking shareholder approval or establishing an independent board committee. According to the complaint, this resulted in an unfair process that ultimately led to an unfair price.
Critique of Merger Terms
Beyond the process, the lawsuit also challenges other transaction terms, including the financial analyses justifying the price and multimillion-dollar payouts to critical figures. Additionally, the complaint questions the necessity of merging WWE with UFC to achieve the stated business synergies.
Post-Merger Performance
The lawsuit highlights a significant drop in TKO’s stock price from over $103 on the day the merger concluded to $78.50 on November 24. This value is reportedly below the lowest of the all-cash bids received.
The lawsuit, which became public on November 22, reveals the intricacies of the alleged unfair practices surrounding the WWE-UFC merger. It sheds light on McMahon’s strategic maneuvers, questionable board decisions, and the resulting impact on the company and its investors. As legal proceedings unfold, the wrestling and entertainment industry will be closely watching the outcomes of this high-profile case.
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