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Bidding wars and trophy assets $MANU $WWE
One of the rules I’ve casually tossed around is that when there’s a bidding war for a trophy asset, just close your eyes and buy the stock because the premium paid for it is likely to be massive. (O- PS, after saying “close your eyes and buy”, now’s a great time to remind you that you should absolutely never do that and I’ll just go ahead and refer you to my disclaimer here).
Unfortunately, while that rule sounds smart and pithy, I’ve never been great at executing it. Whenever there’s a trophy asset up for sale, the stock inevitably runs a bunch and I think to myself, “shoot, I missed it!”….. and then the company sells themselves for a 30% premium to the price it’s run to!
There are currently two public market “sports” assets for sale that I would consider trophy assets: Manchester United (MANU) and WWE (WWE). Given the similarities between both situations, I figured I’d do a dual post.
Let’s start with MANU. In November, the club announced a strategic process. The stock has been a rocket ship since the announcement, and things are just heating up. First round bids for the club are due Friday, and the press is reporting three different bidders (Sir Jim Ratcliffe, Qatar, and Saudi Arabia), with a few other bidders floating around.
As I write this, MANU is trading for ~$25/share. That would put their EV just below $5B (note I’m using USD there). There have been several leaks from the family side on pricing expectations; if I had to sum them up, the leaks are saying “if you want to sell, the family will hit a £6B bid. If the bids are under £5B, then they probably won’t sell.” (Note that both of those bids are in pounds, not USD)
I just look at that set up and think “what am I missing?” The family leaked a bunch of price expectations, and you’ve got three deep pocketed bidders who saw those expectations and are still involved. A £5B bid would be ~$6.2B, which would get you to a low $30s share price. Sure, there’s a lot of downside if the family decides not to sell, but given the publicity and that the bidders are still there, it seems pretty likely a transaction is happening here.
The other trophy asset for sale is the WWE. Plenty of ink has been spilled on the drama here recently, but basically Vince McMahon controls the WWE. He stepped away from the WWE last year due to a “hush money / harassment scandal”, but earlier this year he exercised his control rights to return to the board and force the company to evaluate strategic alternatives.
From a sale standpoint, McMahon’s timing is perfect. The WWE’s media rights are coming up for sale, and we’re seeing skyrocketing values for sports types media rights as they are the only thing that can consistently attract a passionate audience. By pursuing a sale now, Vince can let a buyer chart the WWE’s next course. For example, if Comcast buys WWE, they can chose how they want segment WWE’s rights between their cable bundle channels and Peacock to maximize value. Alternatively, a trophy buyer could buy the WWE now and handle negotiations themselves. Perhaps they would look to maximize the WWE’s media rights by selling different pieces to different buyers, or maybe they look to bundle the WWE with another entertainment offering to create an even bigger bundle of live entertainment that media companies would pay an even larger premium for?
At today’s share price of ~$88/share, the WWE’s EV is ~$6.6B. I see estimates for the WWE to do ~$400m in EBITDA for 2023, so you’re talking about a mid-teens EBITDA multiple. That’s high but not crazy. But ignore the multiple for a second. Below is a screenshot of Peacock I took this afternoon. (BTW- completely unrelated to anything, but Poker Face is delightful).
The WWE is big enough to warrant its own tab! The WWE generates hundreds of hours of content every year, has a massive fan base, and has mammoth marketing opportunities. NBC is thinking about getting back into the NBA game, and rumors are the next NBA deal will come in at something like $50B for nine years (~$5.5B/year).
At ~$100/share, the WWE’s EV would be <$8B. That EV is less than two years worth of the NBA rights, and whoever buys the WWE would control all of their rights forever.
Obviously there are lots of puts and takes between the WWE and NBA, but when you look at it that way a giant bid for the WWE (again, a property that can standup its own tab on Peacock!) starts to look a lot more interesting, no?
Anyway, I wanted to group MANU and WWE together because they’re both trophy assets that are for sale at the same time…. and because they both have the same risk.
MANU and WWE are both controlled companies. They could decide to walk away from a sale. They could have unrealistic price expectations. They could sell a minority stake in the team (it seems like MANU is at least considering this process). They could sell control of the teams and leave minority shareholders out to dry (it seems like WWE is at least considering this process, particularly if Vince stays in control).
But the thing with trophy assets is that when they’re generally up for sale once. If you’re a billionaire or strategic acquirer, that means you’ve got one shot to buy them. If you’re a billionaire who dreamed of owning MANU since you were a child, this is your only chance to own them. Not only that, but MANU fans hate the Glazers. This is your chance to buy the team you’ve followed since you were a kid and be a hero to MANU fans worldwide (PS- this line of thinking is why MSGS is an almost instant buy if they ever put the Knicks / Rangers up for sale; Dolan is so hated that whoever buys the team from him will be the toast of NY for a decade). If you’re a state oil company…. well, does money even matter to you? You’ve got an unlimited check book, but owning MANU can give you connections, legitimacy, and, let’s face it, reputation whitewashing that mere money can’t buy.
There aren’t many live properties with millions of passionate fans worldwide that crank out hundreds of hours of content per year….. and there are even fewer that ever change hands or where you can exercise serious control. The WWE is one of the few. It’s launched the careers of superstars (the Rock) and even Presidents (well, ok, President singular, but it could be plural if the Rock ever runs!).
Whether you’re a fan, a strategic bidder, or just someone with insanely deep pockets, WWE and MANU are two unique trophy assets. This is your one chance to own / buy them. When trophy assets come for sale with a “this is the one chance to buy them,” the bidding tends to get pretty crazy, and pretty crazy bidding tends to result in offers that the sellers just can’t say no to.
Anyway, this post was a little long and rambling, but I’ve been surprised how little the MANU stock has moved as we get a constant trickle of good news about deep pockets bidders, so I wanted to get the post out now to highlight the situations / plant my flag in them a little bit / ask what I’m missing here.