Will the Next WWE Battle Be a Fight Among Would-be Buyers?

WWE Monday Night Raw In Las Vegas
Ethan Miller/Getty ImagesWorld Wrestling Entertainment Chairman Vince McMahon

By Tara Lachapelle

To spark a bidding contest for World Wrestling Entertainment Inc. (WWE), all Vince McMahon needs to do is wave a "for sale" sign.

McMahon, 68, controls the voting power of the $2.3 billion company that's been entertaining spectators with staged fights for decades. The stock is at a record after WWE launched its own subscription streaming network and became the subject of takeover speculation. Should McMahon ever decide he's ready to sell, companies from Comcast Corp. (CMCSA) to Madison Square Garden Co. (MSG) may line up with offers, Albert Fried & Co. and National Alliance Capital Markets said.

"What is McMahon's succession plan and who will he pass the keys of the kingdom to?" Robert Routh, an analyst at National Alliance, said in a phone interview. "WWE would be very attractive to many different types of buyers. What they've built can't be recreated. But without McMahon's blessing, it doesn't matter how much somebody is willing to pay for the company."

The franchise that thrust Hulk Hogan and The Rock into stardom owns the television shows "Raw" and "Smackdown," which have a dedicated following and command high cable-TV ratings, Vertical Group said. The company, which is hosting its annual WrestleMania event in three weeks, will post its best revenue and profit growth in more than a decade next year, according to analysts' estimates compiled by Bloomberg.

Stock Surge

The stock has climbed 35 percent this month, in part because of takeover speculation, to close at $30.94 last week. WWE isn't in merger talks, Chief Financial Officer George Barrios said in an interview March 6. A representative for the Stamford, Connecticut-based company, declined to comment last week beyond Barrios' earlier statement.

%VIRTUAL-article-sponsoredlinks%WWE's programs, which air on Comcast's USA and SyFy cable networks, may find a new home by the end of April, Barrios said. He said the company is in discussions on future domestic TV distribution with "multiple parties."

It has held distribution talks with companies such as AMC Networks Inc. (AMCX), though a renewal with Comcast's NBCUniversal is also possible, people with knowledge of the situation said.

McMahon controls WWE through Class B shares that have added voting rights. His daughter Stephanie McMahon Levesque is the company's chief brand officer, and her husband, pro-wrestler Paul "Triple H" Levesque, is executive vice president for talent and live events. McMahon's wife Linda McMahon helped found the company and has since mounted failed bids to win a U.S. Senate seat in Connecticut. Their son Shane McMahon is chairman of publicly traded You On Demand Holdings Inc., which streams movies in China.

'Strong Numbers'

Men account for two-thirds of WWE's audience, which consistently tops 4 million viewers on Monday nights on USA, according to Nielsen data compiled by Horizon Media Inc. In the week ended March 9, WWE's "Raw" was the third most-watched cable show, trailing only "The Walking Dead" and "Duck Dynasty," the data show.

"These are pretty strong numbers for cable," Brad Adgate, director of research at Horizon Media, said in a phone interview. For advertisers, "it's a great target for young males."

WWE's library of characters, story lines and hours of footage can't be easily replicated, which is why it could lure buyers, said Routh of National Alliance.

To persuade McMahon to sell his wrestling empire, any deal would probably have to be structured similar to Walt Disney Co. (DIS) and Pixar's relationship, in which the computer-animation studio operates independently even though it's owned by Disney, he said. Disney acquired Pixar in 2006.

Partnership Opportunity

"That type of situation would probably be the most likely one as far as the McMahons being able to be comfortable" with selling the company, Kim Opiatowski, a New York-based event-driven analyst at Vertical Group, said in a phone interview. "It's a question of a loss of control of the company. It'd be tough to take it out of the family's hands unless they felt there was something so compelling or such a good strategic partnership opportunity."

Comcast is a "natural acquirer" for WWE because it already airs the wrestling shows and Chief Executive Officer Brian Roberts isn't afraid to manage more than one type of media asset, said Richard Tullo, New York-based director of research at Albert Fried. Comcast owns cable and broadcast TV networks, the Xfinity cable service, the Universal Pictures movie studio and theme parks. A representative for Comcast said the $132 billion company doesn't comment on speculation.

Toys, Games

In addition to WWE's TV shows, any buyer would have to manage its wrestler-themed products such as video games and toys as well as its more than 300 annual live events.

Sports and live events are Madison Square Garden's specialty, which makes it a logical suitor, Tullo said in a phone interview.

MSG owns the New York Knicks basketball team and the New York Rangers hockey team, as well as the Manhattan arena they play in. The company is looking to sell its Fuse music TV channel, which people with knowledge of the situation said has so far drawn bids from both Jennifer Lopez and her former beau Sean "Diddy" Combs.

"MSG can manage WWE because they know the ropes," Tullo said. "MSG owns sports teams, they own arenas, they have the WWE in their venues. It would just need a couple of chips to fall into place first, such as selling Fuse."

Live Nation

Closely held Anschutz Entertainment Group, the owner of the Staples Center in Los Angeles, and Live Nation Entertainment Inc. (LYV), the world's largest concert promoter, also have the ability to operate WWE's assets, Tullo said.

Representatives for MSG, Live Nation and Anschutz declined to comment on the companies' interest in acquiring WWE.

Disney, with its expertise in managing and marketing characters across platforms from the big screen to consumer products, is another possible suitor, Routh of National Alliance said. The backing of Disney, a $140 billion entertainment conglomerate, would increase WWE's value, he said.

"You can't look at what WWE is worth today," Routh said. "It's about what it's worth in the hands of Disney, with all of their muscle behind it."

A representative for Burbank, California-based Disney didn't return messages seeking comment.
Disney's cash and equivalents of $4.4 billion is almost double the size of WWE's market value, data compiled by Bloomberg show. Comcast's cash stockpile is even larger at $5.3 billion, the data show.
"If you were Disney or Comcast looking at the numbers and what you could do with WWE, you could probably justify paying a decent price and it's still petty cash to you," Routh said. "The question is, what's the asking price, if there even is one. Only Vince McMahon knows."

To contact the reporter on this story: Tara Lachapelle in New York at tlachapelle@bloomberg.net
To contact the editors responsible for this story: Beth Williams at bewilliams@bloomberg.net Whitney Kisling