Endeavor executive chairman Patrick Whitesell is launching a new media company backed by Silver Lake as part of the private equity firm’s deal to acquire the sports and entertainment giant at an equity value of $13 billion and take it private.
According to a filing with the U.S. Securities and Exchange Commission, Silver Lake will invest $250 million of seed equity into the company.
The money will be used for “(a) investing in and providing services to companies in the entertainment, media and sports industries; (b) developing, producing, financing and exploiting film, television and digital audio visual content; (c) talent management; and (d) consulting with other entertainment companies.”
Whitesell will be appointed as a member of Endeavor’s board of directors and, if requested by the company or Silver Lake affiliate, will be appointed as “chairman of the governing body of William Morris Endeavor Entertainment.”
If appointed WME chairman upon closing of the transaction, Whitesell will be entitled to receive quarterly royalty payments from WME equal to 2.5% of the quarterly net cash profits of the agency representation business. In the event Whitesell declines or is not appointed as chairman of WME, he will receive a lump sum payment of $60 million.
Whitesell, who has previously served as co-CEO of both Endeavor and WME, was appointed executive chairman of Endeavor Group Holdings in October 2017. He joined Endeavor in 2001 following stints as an agent at United Talent Agency and head of CAA’s talent department. In 2009, Whitesell and CEO Ari Emanuel would go on to merge the company with William Morris to create WME.
In addition to the new media company, the filing notes that Emanuel will be appointed as CEO of Endeavor, a member of the board of directors, and founder and executive chairman of WME upon closing of the Silver Lake deal.
As part of the move, he’ll be eligible to receive a $25 million asset sale transaction bonus and will be entitled for royalty payments from WME equal to 2.5% of the quarterly net cash profits. He’ll also receive new equity awards representing an initial award of 2.5%, made up of one-third of options and two-thirds of restricted stock units, and a supplemental award of 0.5% of the equity interests, calculated on a fully diluted basis.
Starting on the second anniversary of the closing, Emanuel will also have a one-time right to require that the company repurchase all or a portion of his company interest. Whitesell will have the same right as Emanuel starting on the first anniversary of the deal close.
Meanwhile, Mark Shapiro will serve as Endeavor’s president and a board member of the private company, with his employment term set to expire on the fourth anniversary of the effective date of the merger.
He will receive a $7 million base salary, a guaranteed annual bonus equal to $15 million for each year during his employment with the private company, and a new equity award representing 1% of the issued and outstanding equity interest of the company, consisting of options and restricted stock units.
He’ll also receive a one-time $15 million transaction bonus and be eligible to receive a cash bonus of up to $100 million upon completion of certain qualifying asset sales. Shapiro will earn an asset sale bonus equal to $20 million upon each of the first three asset sales where the cumulative consideration received for the specified assets sold equals or exceeds $1 billion, $2 billion and $3 billion, respectively.
Upon payment of the asset sale bonus that results in a final asset sale, Shapiro will be automatically terminated and appointed managing partner and sole president of WME, where he’ll receive a $5 million base salary and a target annual bonus of $5 million ($2 million of which will be guaranteed).
The transaction, which is subject to the satisfaction of customary closing conditions and required regulatory approvals, is expected to close by the end of the first quarter of 2025.
Under the terms of the agreement, Endeavor stockholders will receive $27.50 per share in cash, representing a 55% premium to the unaffected share price of $17.72 per share at market close on Oct. 25, the last full day of trading prior to Endeavor announcing a review of strategic alternatives.
The merger agreement includes covenants requiring the new company, at Endeavor’s request, to use “their reasonable best efforts to facilitate, negotiate and consummate the sale transfer, divestiture or other disposition” of the company’s subsidiaries, business organizations, divisions or assets, excluding TKO Group Holdings and its subsidiaries and the agency representation business of WME and its subsidiaries. It also requires the company to declare and pay a quarterly dividend of 6 cents per share.
If Endeavor accepts a “superior proposal” to Silver Lake’s offer, it would pay a breakup fee of $288.5 million. If the deal is terminated in other certain circumstances, including “a breach of Parent Entities’ obligations under the Merger Agreement,” Silver Lake would be required to pay Endeavor a termination fee of $705 million.
