TheChek News Flow

TKO plans to pursue future acquisitions of sports-focused companies, president of new company says

A new publicly traded company formed by the combination of WWE and UFC is entering the ring in hopes of capitalizing on the migration of sports and live entertainment from traditional television to streaming.

TKO will begin trading Tuesday with the aim of making more content, including UFC fights, available via streaming services in the future, said Mark Shapiro, its president and chief operating officer. TKO, which stands for technical knockout in boxing, is an allusion to the fighting focus of both organizations.

“We are well-positioned to capitalize on the demand for live sports and entertainment across linear and digital, and we have enough content to do both,” Shapiro said. The combined company has high-profile rights deals with entertainment companies including Fox, Disney and Comcast for its Peacock streaming service.

WWE and UFC generate revenue from streaming and TV rights as well as ticket sales and merchandise tied to their popular lineups of celebrity fighters. Investors have cheered the advent of the combined new company in part because it can make money from traditional TV but isn’t entirely beholden to it as more consumers cut the cord in favor of streaming services.

TKO Holdings will trade on the New York Stock Exchange. Entertainment company Endeavor Group Holdings EDR 0.50%increase; green up pointing triangle owns 51% of TKO, while wrestling organization WWE owns the remaining 49%.

Endeavor also owns the WME talent agency, the IMG sports and events firm, and Professional Bull Riders. It trades on the New York Stock Exchange under the ticker symbol EDR.

Endeavor’s purchase of WWE, which its Hollywood talent agency has long represented, was closely watched because of the wrestling organization’s enduring fan base and strong demand among consumers, TV networks and streaming services alike for live sporting events.

The company plans to pursue potential future acquisitions of companies focused on other sports, Shapiro said.

“We see a real opportunity to fold in other leagues to add to the equation,” he said. The company plans to spend the next 18 months focused on integrating its holdings before exploring such acquisitions.

The combination of the two fight-focused companies gave UFC an enterprise value of $12.1 billion and WWE an enterprise value of $9.3 billion, the companies said in April when the deal was announced.

The company’s TV and streaming deals for WWE and UFC content expire within the next three years, which could give TKO an opportunity to increase the rights fees for the popular content. Streaming platforms eager to attract and retain customers view live sports as a way to keep customers engaged regularly for long viewing sessions.

Disney’s long-term deal for UFC content expires in late 2025. That pact, which provides fights for both ESPN and ESPN+, expires next year and is valued at $300 million annually, The Wall Street Journal reported.

Deals for WWE’s “SmackDown” and “Raw,” which air on Fox and NBCUniversal’s USA Network respectively, expire next year. The combined value of those deals is about $468 million annually, The Wall Street Journal previously reported.

Peacock’s five-year deal to stream WWE fare expires in 2026 and is valued at more than $1 billion.

WWE Chairman Vince McMahon will serve as executive chairman of TKO. Other board members include Jonathan Kraft, president of the Kraft Group, which owns the New England Patriots; former CBS Entertainment President Nancy Tellem; and Steve Koonin, chief executive of the Atlanta Hawks NBA franchise.

McMahon briefly left the WWE following a series of articles from The Wall Street Journal that detailed payments he had made for decades to suppress allegations of sexual misconduct.

Following the revelations, McMahon retired in July 2022 after 40 years. He returned in January to pursue a sale, the Journal previously reported.

Irish group’s tie-up with US rival will create world’s largest packaging company

The head of paper and packaging group Smurfit Kappa has defended the decision to switch the company’s primary listing to New York as part of a merger with US rival WestRock, saying that he expects the combined group will achieve a higher valuation on Wall Street.

Dublin-based Smurfit is ditching its main listing in London and leaving the blue-chip FTSE 100 index in favour of New York, where shares of WestRock already trade.

The tie-up between the groups comes as the benefits from a pandemic-driven boom in ecommerce fades, dragging the shares of Smurfit, WestRock and rival International Paper down from highs hit in 2021.

“We want to gravitate towards a market that has much more liquidity and higher ratings,” said Tony Smurfit, who will be chief executive of the combined group, which will be called Smurfit WestRock.

“And if we’re the best, which I think we will be, in time, then we will have a significantly higher rating than we currently have, which obviously will translate into significant value creation for our owners,” he added.

The decision underlines the challenges facing a London market that over the past year has missed out on the initial public offering of UK chipmaker Arm and suffered a severe slowdown in listings. Smurfit WestRock will retain a standard listing in London.

Under the terms of the deal announced on Tuesday, Smurfit shareholders will own 50.4 per cent of the combined company and WestRock investors will own the remaining 49.6 per cent.

The deal values each WestRock share at $43.51, a 28 per cent premium to the stock’s closing price on Tuesday and 36 per cent above where it was trading before the companies disclosed last week that they were in talks.

Shares in Smurfit fell 8 per cent on Tuesday, with analysts at JPMorgan saying that investors had expected the deal to have a smaller premium. WestRock shares gained 7 per cent in pre-market trading in New York.

Tony Smurfit, who has run the Irish group since 2015, shrugged off the fall in the share price, saying that “when people understand the transaction and see the potential benefit, I think that [the share price] will come back strongly”.

“We believe together we’ll be much stronger. And so, you know, there’s a price to be paid for that,” he added. Smurfit WestRock expects to be the world’s largest packaging company by revenues in packaging, surpassing International Paper.

The two companies first began talks eight months ago after WestRock approached Smurfit about an initial deal that was not pursued.

David Sewell, chief executive of WestRock, said that combining the groups would provide a “truly comprehensive offering of packaging solutions for customers and delivers meaningful value to our shareholders today and into the future”.

Smurfit and WestRock, which has its headquarters in Atlanta, expect to wring $400mn of synergies from the deal in the first year after its completion.

The merger “gives us 65 per cent of our business in the Americas, which justifies the reason why we should be in the United States”, Smurfit said. “If you’ve just a small [US] presence, I don’t think it makes sense,” he added of the listing decision.

Despite the post-pandemic slowdown, Smurfit was upbeat on the outlook for the paper and packaging industry. “I think the corrugated packaging business, the speciality consumer business have a fantastic future . . . the replacement of plastic products in a more and more sustainable world is going to be replaced by our products.”

How a quiet regional poll turned into a debate about Germany’s past and future

An antisemitism scandal has derailed Christian Democrat hopes for forthcoming elections

The upcoming elections in Hessen and Bavaria on October 8 had looked practically tailor-made for Germany’s centre-right Christian Democrats to prove their vigour and resilience. Both are large western states run by conservative minister-presidents favoured for re-election. In Frankfurt, the CDU has governed in discreet harmony with the Greens since 2014. In Munich, its sister party the Christian Social Union has been in power since 1957; it has been sharing it with the Free Voters, a libertarian-ish local party, since 2018. 

Hessen and Bavaria have deeply traditionalist voter bases. At a time when hard-right groups are besieging conservative parties across Europe, this fact has helped keep a surging, radicalised Alternative for Germany at bay in both states. (The AfD is polling at or over 20 per cent nationwide, but only at 16 in Hessen and 12 in Bavaria.)

Coming at the halfway point between general elections, these two state votes were expected to work like midterms in the US: as a protest against the unloved “traffic light” coalition headed by chancellor Olaf Scholz. In an ideal conservative world, they would not merely return the two minister presidents to office but burnish their chances — and the party’s — for national leadership in 2025. Hessen’s Boris Rhein is still a relative unknown; but Bavaria’s Markus Söder has made no secret of his conviction that the place for a man of his stature and ambition is Berlin. 

But in late August, the Free Voters’ leader Hubert Aiwanger had to admit the accuracy of newspaper accusations that he had been found in possession of copies of a leaflet with hateful jokes about concentration camps as a schoolboy in 1987; a number of fellow students subsequently accused him of making antisemitic quips and the Hitler salute.

And with that, a quiet and seemingly predictable regional election campaign turned into an explosive national debate over Germany’s treatment of the Holocaust, its much-vaunted “culture of memory”, the future of the country’s centre-right, and the character and judgment of its conservative leaders. 

It could have been so easy. Aiwanger could have immediately expressed remorse, apologised and atoned. Instead, he remarked thinly that the pamphlet was “disgusting and inhuman”, but he had not written it; shortly thereafter, his brother said he had been the author. A few days later, Aiwanger did aver that he was sorry. Yet his afterthoughts — that he had not been an antisemite “since becoming an adult”, and that he was the victim of a media vendetta — did not help matters. (Aiwanger has flirted with AfD tropes like the “silent majority” and “taking back democracy”.) 

The director of the Dachau concentration camp memorial noted that the pamphlet, far from being a schoolboy’s angry rant, was carefully composed and “full of extreme right codes”. It also reflected an unusual depth of knowledge about how the Nazi machinery of mass murder worked — at a time when a not inconsiderable number of Germans still claimed such nasty details were allied propaganda.

The 90-year-old Charlotte Knobloch, a Holocaust survivor and leader of the Jewish community in Bavaria, said that she had not accepted Aiwanger’s apology. There were nationwide calls for Aiwanger to resign, or for Söder to fire him. 

Remarkably, none of it happened. The obdurate Aiwanger is filling beer tents across Bavaria, cheered by supporters who know that the gifted populist is their party’s single viable candidate. Söder — faced with the realisation that the Greens, whom he has vilified, would be his only alternative — clenched his teeth and said that while he was deeply unsatisfied with Aiwanger’s responses to questions, letting him go now would be “disproportionate”.

Friedrich Merz, the CDU’s national leader, who himself is trying to shift his party towards a more hard-edged conservatism and has referred to the Greens as the “main enemy”, applauded Söder for his “brilliant” handling of the situation. The political fate of the three men is now interlocked; and all three already appear diminished by this sordid episode of lessons from history not learnt.

The voters will deliver their final verdict on October 8 — but there are some warning signs already. The Free Voters’ poll numbers are ticking up, while those of the CSU are slipping. In the last election, in 2018, Söder had himself toyed with an “AfD-lite” discourse. He was punished with the CSU’s lowest vote share since 1950: 37 per cent. The latest poll has it at 36. But more is at stake than the future of Germany’s last big-tent party.

Roles of government, Environment Agency and Ofwat in monitoring and enforcement of discharges by water companies under scrutiny

England’s environmental watchdog said on Tuesday it had identified “possible failures” by the government and two regulators in the way they monitor and enforce water companies’ handling of sewage spills.

The findings by the Office for Environmental Protection follow a year-long investigation as public anger has grown over the amount of raw sewage being pumped into rivers and coastal waters by water companies.

By law, the discharge of untreated effluent directly into waterways is only allowed under “exceptional circumstances” such as heavy rain. But the watchdog said the Department for Environment, Food and Rural Affairs, the Environment Agency and Ofwat, the water industry regulator, “may have interpreted the law differently, permitting such discharges to occur more often”.

Academics from Imperial College London and campaign groups have collected evidence that suggests some water companies have pumped raw sewage into coastal waters and rivers even during dry periods.

The OEP, which launched the probe after a complaint by the campaign group Wildfish, has given the government and regulators two months to respond to its findings and outline what steps, if any, they plan to take.

This is thought to be the first time the agency, which was set up post-Brexit to replace some of the oversight functions of the European Commission in Brussels, has used its powers. The watchdog can ultimately take legal action to enforce compliance.

Guy Linley-Adams, WildFish’s in-house solicitor, said: “Let’s be quite clear here. Those three public bodies are complicit in allowing the pollution. That must now end.”

The government said that it disagreed with the OEP’s “initial interpretations, which cover points of law spanning over two decades” but it said it would continue to “work constructively” on the issue with the watchdog.

The Environment Agency said it shared the OEP’s “ambition to drive improvements in water quality”, adding: “We will always take action against companies that do not follow the rules or those that are deliberately obstructive.”

Ofwat said: “We welcome the OEP’s considerations, particularly on the clarity of responsibilities for the protection of the environment and we will work with them as their investigation moves forward.”

The intervention comes as water companies face several legal cases and regulatory investigations into sewage outflows.

The Environment Agency last year launched a criminal investigation into companies’ compliance with discharge permits at sewage treatment works. Ofwat also has a separate investigation into the management of sewage treatment works, which could result in hefty fines. Neither investigation has yet been concluded.