UNITE HERE Puts Zuffa Value At 2.23 Billion Lack Of Growth Hurting Overall

When Dana White and the Fertitta Brothers decided to team up and purchase the UFC, the organization was on the verge of crumbling. Over the fast ten years or so, the company has tinkering on the edge of mainstream and the underground, which has helped to suit newcomers, as well as hardcore, old-school fans. The sport, which was once rebuked severely, has become revered. ESPN and other major sporting media networks once shied away from covering the sport. Now, they cover even the events fans are least enthusiastic about.

UNITE HERE provides insight into the private company, after a two-part valuation report and it pretty much confirms what everyone has already expected. Despite the initial explosion in popularity, growth, and revenue, the sport has become stagnant. According to UNITE HERE, the company’s estimated value sits around $2.23 billion for an estimated equity value of $1.76 billion, when taking the company’s long-term debt into consideration. For fans of the sport, it is no secret that the UFC has failed to expand internationally.

Despite hosting shows in Australia, Ireland, Brazil, and the United Kingdom, Zuffa LLC has all, but ignored, the biggest markets, such as China and Russia. Not only has this prevented foreign fans from embracing the sport, but it also resulted in the stabilization of the company’s revenue from 2012 to 2015. An analyst with UNITE HERE, Jim Sullivan, recently admitted the UFC’s inability to expand into these markets has resulted in very little revenue growth during the aforementioned time period. The analyst went on to state that the firm believes the UFC to be less valuable than the country’s most iconic sports franchises, such as the New York Yankees and the Dallas Cowboys. He also admits the stadiums for the aforementioned sporting franchise could potentially reach $2 billion in value collectively.

The first segment of UNITE HERE’s report discredits claims that the UFC could be as valuable as some of the top sports franchises and instead puts the company in line with World Wrestling Entertainment. The second segment focuses on the company’s international growth, current Reebok partnership, as well as labor and legal issues. In the end, UNITE HERE cites the company’s lingering revenue of approximately $600 million in 2012 and 2015 as one of the primary reasons the UFC doesn’t deserve a high valuation multiple.

Recently, rumors have circulated regarding the potential sale of the UFC. Dana White denies the rumors, but admits he’d be open for a conversation, if someone was willing to offer up $4 billion. Two massive Chinese entertainment companies, Dalian Wand Group and China Media Capital, reportedly submitted bids to purchase the company sometime within the past month. Dalian Wanda Group has already expressed their desire to delve into the Western market with the acquisition of Legendary Entertainment in January. Would a Chinese company have more initiative to push the UFC brand into the Chinese market and further increase the company’s revenue?

In May, Dana White admitted the group was working growing the company and pushing it into territories, such as China, Japan and Korea. According to the report, the owners only intend to sell approximately 11 to 15% of the company and have already been in chats with a Chinese company to do so. The UFC hasn’t returned to China since 2014, but they have worked to make their content easier accessible to the Chinese audience, by partnering with Sina Sports in January of 2016 in a deal that would allow them to stream events to mainland China. The 2-stage UNITE HERE report is available at ZuffaInvestorAlerts.org.