WME-IMG Teams With Private Equity Firms for $4B UFC Purchase

Michael Dell's MSD Capital and KKR are also part of the consortium buying the world's largest mixed martial arts business.

Entertainment and sports powerhouse WME-IMG is getting a big kick to its bottom line.

A consortium led by WME-IMG that includes backers MSD Capital, KKR and Silver Lake has finalized a deal to acquire mixed martial arts powerhouse Ultimate Fighting Championship. Sources peg the price tag at slightly less than $4 billion. The deal, which was finalized this weekend, was announced early Monday morning.

UFC, the biggest mixed martial arts business in the world, has been on the auction block, with several suitors reportedly having looked at it. WME-IMG, led by co-CEOs Ari Emanuel and Patrick Whitesell, will serve as the operating partner. MSD is the investment vehicle for the family of Dell Computers founder Michael Dell. KKR is the New York-based private equity firm and Silver Lake is WME-IMG's majority owner and a Silicon Valley-based PE firm.

UFC president Dana White, who will maintain a small stake in the company, will continue in that role after the sale. White earlier this year denied any sale plans for the privately held firm, saying bluntly: "We are not for sale."

In a statement Monday, White said "No other sport compares to UFC. Our goal has always been to put on the biggest and the best fights for our fans, and to make this the biggest sport in the world. I'm looking forward to working with WME-IMG to continue to take this sport to the next level."

UFC, whose matches air on pay-per-view television and on Fox Sports, is one of the fastest growing leagues in sports. Its fans are younger and more diverse than those of traditional boxing.

Zuffa, founded by casino executives Frank and Lorenzo Fertitta, acquired UFC for just $2 million in 2001. (The Fertittas will maintain a small stake in the league, but Lorenzo will step down from day-to-day operations after the deal closes.) Flash Entertainment, a subsidiary of the government of Abu Dhabi, bought a 10 percent stake in the company in 2010. UFC's last full-year earnings reportedly came to $200 million to $250 million.

"We're confident that the new ownership team of WME-IMG, with whom we've built a strong relationship over the last several years, is committed to accelerating UFC's global growth," Lorenzo Fertitta said in a statement Monday. "Most importantly, our new owners share the same vision and passion for this organization and its athletes."

WME-IMG, a combination of talent agency WME and sports and fashion power IMG, has been growing its live events business, last year buying Professional Bull Riders for an estimated $100 million and the Miss Universe pageant. It also has expanded its events business in China, striking a partnership last month with China web giant Tencent and Sequoia Capital.

"We've been fortunate over the years to represent UFC and a number of its remarkable athletes," Emanuel and Whitesell said in a joint statement Monday. "It's been exciting to watch the organization's incredible growth over the last decade under the leadership of the Fertitta brothers, Dana White and their dedicated team. We're now committed to pursuing new opportunities for UFC and its talented athletes to ensure the sport's continued growth and success on a global scale."

Paul, Weiss, Rifkind, Wharton & Garrison; Kirkland & Ellis; Simpson ,Thacher & Bartlett; and Proskauer Rose served as legal advisors to the buying consortium and Freshfields served as legal advisor to MSD Capital. The financial advisors and companies providing financing for the transaction are, in alphabetical order: Barclays, Credit Suisse, Deutsche Bank, affiliates of Goldman Sachs and KKR Capital Markets. UFC was advised by Milbank, Tweed, Hadley & McCloy; The Raine Group; and J.P. Morgan.

July 11, 5:45 a.m. PT This story has been updated with details from the press release announcing the deal.