Endeavor Group Holdings disclosed a strategy this week to divest its sports betting divisions as part of a previously-announced plan this spring to be acquired by a private equity giant.
The strategic plan comes months after Endeavor entered into a definitive agreement in April to be acquired by Silver Lake, a prominent global technology investment firm. Endeavor indicated Thursday that it began to actively market the divisions, OpenBet and IMG Arena, during the second quarter of 2024. The businesses, which comprise Endeavor’s sports data and technology segment, are presently characterized as “held for sale” Endeavor announced in a second-quarter earnings release. While Endeavor presented the businesses as “discontinued operations” in the company’s consolidated interim financial statements, the segments will continue “operating as usual” according to the company.
Under April’s $13 billion take-private agreement, Silver Lake will acquire 100% of the outstanding shares it does not already own, other than rolled interests, according to a press release on the deal. At the time, Endeavor disclosed its intent to transfer, divest, or sell certain business units or assets of the company. Endeavor earmarked a large portion of assets for a potential sale, excluding those within TKO Group Holdings and the agency representation business WME, the company announced on Thursday.
A Proper Multiple? 3h653o
Endeavor entered into an agreement in Sept. 2021 to purchase OpenBet from Scientific Games in a $1.2 billion cash-and-stock deal. Upon the purchase, Endeavor CEO Ari Emanuel unleashed an ambitious plan to create a suite of “end-to-end solutions” for sportsbooks, leagues, and federations worldwide.
Endeavor, which already owned IMG Arena, aimed to create a sports betting powerhouse through the sports data and technology unit. In a presentation outlining the transaction, Endeavor projected 2022 pro-forma revenues of $340 million. The transaction implied a revenue multiple of approximately 8x, according to the company.
In conjunction with the 2021 transaction, Endeavor CEO Ari Emanuel described OpenBet as a strategic addition to the company’s growing sports betting portfolio. OpenBet also offers player management solutions and pricing feeds through Don Best, a sports betting data provider acquired by Scientific Games in 2018. The 2021 agreement enabled Endeavor to fill its war chest as the company embarked on a plan to round out its technological offerings for sportsbook operators.
Through league partnerships with the UFC, the Professional Bull Riders Tour, and Euroleague Basketball, Endeavor maintained the scale to integrate streaming and data platforms across numerous professional sports.
The transaction also prompted analysts to question whether Endeavor would explore an onscreen betting solution for prominent events in tennis and golf. Endeavor projected estimated, incremental run-rate revenue synergies of $100 million at maturity.
But as Endeavor moves closer to privatization, the planned divestiture raises the possibility that market leaders Sportradar and Genius Sports may explore an attempt to acquire OpenBet. Addressing analysts at Genius Sports’ second-quarter earnings call this week, CEO Mark Locke noted that the environment for sports betting data rights is becoming “increasingly duopolistic.”
Genius is the exclusive supplier of NFL official sports betting data to U.S. commercial sports, while Sportradar has a similar partnership with the NBA.
👀 IMG Arena and OpenBet have become the first Endeavor-owned entities to be put up for sale ahead of Silver Lake’s expected privatisation of the sports and entertainment group in Q1 of 2025.https://t.co/lmm4URsfUS
— Martin Ross (@martingrantross) August 8, 2024
Although the private equity industry has taken an active role in the gambling industry for decades, there are signs that leading firms are bullish on furnishing their portfolios with betting-related assets. Last month, Apollo Funds entered into a definitive agreement to acquire IGT’s digital and gaming business and Everi Holdings Inc., in a deal that valued the combined companies at $6.3 billion.
While Endeavor did not hold an earnings call on Thursday, Emanuel said in a statement that the company is focused on “maintaining momentum throughout the business” as it works toward the close of the take-private transaction with Silver Lake.
When consolidating all of TKO’s business into Endeavor, the transaction will have a combined enterprise value of approximately $25 billion, Silver Lake wrote in an April press release. Silver Lake believes the deal will be the largest ever in the media and entertainment sector and the largest private equity sponsor public-to-private investment transaction in more than a decade.
