TKO Group Holdings Inc. filed SEC Form 8-K: Entry into a Material Definitive Agreement, Unregistered Sales of Equity Securities, Other Events, Regulation FD Disclosure
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Item 1.01. Entry into a Material Definitive Agreement.
On October 23, 2024, TKO Operating Company, LLC, a Delaware limited liability company (“TKO”), and TKO Group Holdings, Inc., a Delaware corporation (“TKO PubCo” or the “Company” and, together with TKO, the “TKO Parties”), entered into a Transaction Agreement (the “Transaction Agreement”), by and among Endeavor Operating Company, LLC (“EOC”), a Delaware limited liability company and subsidiary of Endeavor Group Holdings, Inc., a Delaware corporation (“Endeavor”); IMG Worldwide, LLC, a Delaware limited liability company (“IMG Worldwide” and, together with EOC, the “EDR Parties”); and Trans World International, LLC, a Delaware limited liability company and subsidiary of Endeavor (“Trans World International”), pursuant to which, among other things and subject to the satisfaction or waiver of the conditions specified therein, the EDR Parties will directly or indirectly contribute, assign and transfer to TKO the Professional Bull Riders, On Location and IMG businesses currently operated by the EDR Parties (collectively, the “Transferred Businesses”), in exchange for 26,139,590 TKO Common Units, having an aggregate value of $3.25 billion (based on the volume-weighted average sales price of TKO PubCo Class A Common Stock for the twenty five trading days ending on October 23, 2024 (the “Closing Consideration”)), and will subscribe for an equivalent number of corresponding shares of TKO PubCo Class B Common Stock, subject to certain customary purchase price adjustments to be settled at the Closing in equity and cash (the foregoing, collectively, the “Transaction”). All defined terms used in this Current Report on Form 8-K that are not otherwise defined herein have the meanings ascribed to such terms in the Transaction Agreement.
Representations, Warranties and Covenants
The Transaction Agreement contains customary representations, warranties and covenants of the parties thereto. Between the date of the Transaction Agreement and the earlier of the Closing and the termination of the Transaction Agreement, subject to certain exceptions, the EDR Parties and the TKO Parties have agreed to certain covenants, including covenants regarding the operation of business and the use of reasonable best efforts to promptly obtain necessary regulatory approvals, subject to certain exceptions.
Closing Conditions
The Closing is expected to occur in the first half of 2025, subject to the satisfaction or waiver of certain customary conditions, including, among others, (i) the affirmative vote of holders of a majority of the voting power of TKO PubCo common stock in favor of adopting the Transaction Agreement, which shall be satisfied by the delivery of the written consent by the Specified Stockholders in the form attached to the Transaction Agreement (the “Written Consent”) (which has been satisfied by the delivery of the Written Consent by the Specified Stockholders), (ii) obtaining applicable regulatory approvals, (iii) the absence of any order or legal requirement that has the effect of making the Transaction illegal or otherwise restraining or prohibiting the consummation of the Transaction, (iv) the mailing of the information statement contemplated by Rule 14c-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), by TKO PubCo to the stockholders of TKO PubCo, and the lapse of at least 20 calendar days from the date of completion of such mailing, (v) the consummation of the Pre-Closing Restructuring, (vi) the absence of a Business Material Adverse Effect, and (vii) customary conditions regarding the accuracy of the representations and warranties and material compliance by the parties with their respective obligations under the Transaction Agreement .
The Transaction Agreement also contemplates that the EDR Parties, the TKO Parties and certain of their respective Affiliates will enter into ancillary agreements as of Closing, including a transition services agreement, pursuant to which both parties will agree to provide certain services to each other for a specified period, and agreements with respect to the transfer and license of certain specified trademarks.
Indemnification
The Transaction Agreement contains customary indemnification provisions by both TKO and the EDR Parties with respect to, among other things, any breach of Fundamental Representations and Warranties and the performance of both pre-Closing and post-Closing covenants. Indemnification claims with respect to breach of any Fundamental Representations and Warranties will survive for three years following the Closing. Claims with respect to the performance of any pre-Closing covenants will survive for six months following the Closing, and claims with respect to the performance of any post-Closing covenants will survive in accordance with their terms or until fully performed. The EDR Parties have also agreed to indemnify the TKO Parties and their representatives with respect to certain pre-Closing tax liabilities and any liabilities arising from the Pre-Closing Restructuring.
Termination
The Transaction Agreement includes customary termination provisions for both TKO and the EDR Parties, whereby the parties may terminate the Transaction Agreement (i) by mutual written consent; (ii) if the Closing has not occurred within 11 months of the date of the Transaction Agreement (the “Outside Date”), provided that, if the conditions to Closing are satisfied other than the obtainment of the requisite regulatory approvals, then the Outside Date shall automatically be extended by an additional 90 days from the Outside Date; (iii) if the consummation of the Transaction is enjoined or prohibited by the terms of a final, non-appealable order or judgment of a court of competent jurisdiction; and (iv) following a breach by the other party or parties of certain representations and warranties or covenants, subject to cure rights.
Treatment of Endeavor Equity Awards
The Transaction Agreement provides for certain treatment of equity or equity-based awards held by the Business Employees, Independent Contractors or Former Service Providers, as generally described below.
Each unvested restricted stock unit granted under Endeavor’s Amended and Restated 2021 Incentive Award Plan (each, an “Unvested EGH RSU”) held by a Business Employee or Independent Contractor that is outstanding immediately prior to the Closing will be assumed by TKO PubCo, and substituted for a TKO restricted stock unit (each, a “TKO RSU”), subject to terms and conditions that are substantially similar to the terms and conditions applicable to the corresponding Unvested EGH RSU immediately prior to such assumption; provided that the TKO RSUs will relate to a number of shares of TKO PubCo Class A Common Stock as determined pursuant to the Equity Award Adjustment Ratio.
The EDR Group will generally retain and be liable for (i) all Endeavor performance stock units, (ii) all options to purchase EGH Class A Common Stock, and (iii) all Endeavor restricted stock units held by Former Service Providers and phantom and cash-settled equity-based awards, each of which will be treated in accordance with the EDR Merger Agreement.
The foregoing description of the material terms of the Transaction Agreement is not complete and is qualified in its entirety by reference to the Transaction Agreement, a copy of which is attached hereto as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference. The Transaction Agreement and the foregoing summary of such agreement have been included to provide investors and stockholders with information regarding the terms of such agreement. The representations, warranties and covenants of the parties contained in the Transaction Agreement are made solely for the benefit of the parties thereto. In addition, such representations, warranties and covenants are (i) made only for purposes of the Transaction Agreement, (ii) qualified by confidential disclosures made by the parties to each other in connection with the Transaction Agreement, (iii) subject to materiality qualifications contained in the Transaction Agreement which may differ from what may be viewed as material by investors, (iv) made only as of the date of the Transaction Agreement or such other date as is specified in the Transaction Agreement and (v) included in the Transaction Agreement for the purpose of allocating risk between the contracting parties rather than establishing matters as facts. Investors should not rely on the representations, warranties or covenants, or any descriptions thereof, as characterizations of the actual state of facts or condition of the parties or any of their respective subsidiaries or affiliates. Information concerning the subject matter of the representations and warranties may change after the date of the Transaction Agreement, which subsequent information may or may not be fully reflected in the parties’ public disclosures. Moreover, the Transaction Agreement should not be read alone, but should instead be read in conjunction with the other information regarding the parties and other documents that the parties will file with the U.S. Securities and Exchange Commission (the “SEC”).
Item 3.02. Unregistered Sales of Equity Securities.
The information set forth in Item 1.01 above regarding the Closing Consideration is incorporated into this Item 3.02 by reference. The equity to be issued as Closing Consideration is being offered and sold in private placements that are exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).
Item 7.01. Regulation FD Disclosure.
On October 24, 2024, the Company issued a press release announcing the execution of the Transaction Agreement and the Board’s authorization of the capital return program discussed in Item 8.01 of this Current Report on Form 8-K. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
In addition, the Company announced an audio webcast will be held at 8:00 a.m. ET on October 24, 2024, discussing the Transaction and capital return program and providing an update on the Company’s expected results to be reported for the third quarter of 2024 and full-year guidance expectations. The webcast and accompanying presentation can be accessed at investor.tkogrp.com. A recording of the webcast will also be available on the website after the call concludes.
The information included under this Item 7.01 (including Exhibit 99.1 hereto) shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 8.01. Other Events.
On October 24, 2024, the Company also announced that its Board has authorized a share repurchase program of up to $2.0 billion of its Class A common stock and the approval of a quarterly cash dividend program pursuant to which holders of the Company’s Class A common stock will receive their pro rata share of $75.0 million quarterly distributions to be made by TKO. The share repurchase program authorization and repurchases thereunder and approval to initiate a quarterly cash dividend program are separate from and are not conditional upon the signing or closing of the Transaction.
The Company will determine at its discretion the timing and the amount of any repurchases based on its evaluation of market conditions, share price, and other factors. Repurchases under the share repurchase program may be made in the open market, in privately negotiated transactions or otherwise, and the Company is not obligated to acquire any particular amount under the share repurchase program. The share repurchase program has no expiration, is expected to be completed within approximately three to four years and may be modified, suspended, or discontinued at any time.
The Company’s dividend will be paid quarterly to the holders of the Company’s Class A common stock. The Company intends to begin making quarterly cash dividend payments on March 31, 2025. Future declarations of quarterly dividends are subject to the determination and discretion of the Company based on its consideration of various factors, such as its results of operations, financial condition, market conditions, earnings, cash flow requirements, restrictions in its debt agreements and legal requirements and other factors that the Company deems relevant.
Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements in this Current Report on Form 8-K that do not relate to matters of historical fact should be considered forward-looking statements, including, without limitation, statements regarding the Transaction, including the anticipated timing of the Closing, the parties’ ability to complete the Transaction, the parties’ entry into related ancillary agreements, the expected share ownership of the Company following the Transaction’s consummation, and expectations regarding the Company’s capital return program, including the purchases under and completion of the share repurchase program and the Company’s dividend program, including the expected timing and amount of dividends thereunder. The words “believe,” “may,” “will,” “estimate,” “potential,”
“continue,” “anticipate,” “intend,” “expect,” “could,” “contemplates,” “would,” “project,” “plan,” “target,” and similar expressions are intended to identify forward-looking statements, though not all forward-looking statements use these words or expressions. Any such forward-looking statement represents management’s expectations as of the date of this filing. These statements are neither promises nor guarantees and involve known and unknown risks, uncertainties and other important factors that may cause actual results, performance or achievements to be materially different from what is expressed or implied by the forward-looking statements, including, but not limited to: the risk that the Transaction may not be completed in a timely manner or at all, which may adversely affect the Company’s businesses and the price of its securities; uncertainties as to the timing of the Closing and the possibility that any or all of the various conditions to the Closing may not be satisfied or waived, including the failure to receive any required regulatory approvals from any applicable governmental entities (or any conditions, limitations or restrictions placed on such approvals); the occurrence of any event, change or other circumstance that could give rise to the termination of the Transaction Agreement and the Transaction; the effect of the announcement, pendency or completion of the Transaction on the Company’s business relationships, operating results, and business generally; the Transaction may involve unexpected costs, liabilities and/or delays; the Company’s businesses may suffer as a result of uncertainty surrounding the Transaction and disruptions of management’s attention due to the Transaction; the risk that integration of the Transferred Businesses post-closing may not occur as anticipated; unfavorable outcome of legal proceedings that may be instituted against the Company following the announcement of the Transaction; the risk that the Company’s stock price may decline following the announcement of the Transaction; and risks related to the capital return program. These and other important factors discussed in Part I, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as any such factors may be updated from time to time in the Company’s other filings with the Securities and Exchange Commission, could cause actual results to differ materially from those indicated by the forward-looking statements contained in this Current Report on Form 8-K. Forward-looking statements speak only as of the date they are made and, except as may be required under applicable law, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. |
Description | |
| 10.1* | Transaction Agreement, dated October 23, 2024, by and among Endeavor Operating Company, LLC, TKO Operating Company, LLC, TKO Group Holdings, Inc., IMG Worldwide, LLC, and Trans World International, LLC. | |
| 99.1 | Press Release, dated October 24, 2024. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |
| * | Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company undertakes to furnish supplemental copies of any of the omitted schedules upon request by the U.S. Securities and Exchange Commission. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| TKO GROUP HOLDINGS, INC. | ||
| By: | /s/ Andrew Schleimer | |
| Name: | Andrew Schleimer | |
| Title: | Chief Financial Officer | |
Date: October 24, 2024