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Endeavor IPO Poised to Hand Hollywood Executives $1.5 Billion

Anders Melin and Tom Maloney

(Bloomberg) -- Ari Emanuel and Patrick Whitesell built their careers negotiating contracts for some of the world’s top celebrities. They’re about to ink one of their biggest deals yet -- this time for themselves.

The duo and other senior executives have a combined interest in Endeavor Group Holdings Inc. that will be worth at least $1.5 billion if the company lists at the midpoint of its estimated price range. Emanuel and Whitesell are also in line to collect millions in salary and bonuses for years to come.

An initial public offering would make Endeavor the biggest publicly traded Hollywood agency, cementing its rise from a four-person talent-management firm to a media giant. The Beverly Hills-based company, with $3.6 billion of revenue last year, runs sports leagues, hosts fashion events and represents clients including YouTube stars and pro athletes. Endeavor posted a $317 million profit for 2018 after four straight years of losses.

The IPO could raise as much as $619 million and value the firm at about $7.6 billion, according to details disclosed Monday in a regulatory filing. The two agents and private equity firm Silver Lake Partners LP, which became an investor in 2012, will control the firm through a special class of shares.

Read more: Endeavor debt means IPO not for ‘Faint of Heart’

Emanuel, 58, founded Endeavor in 1995 with three colleagues from International Creative Management, one of Hollywood’s largest talent shops. Whitesell, 54, joined five years later. They have struck more than 20 deals in the past decade, including merging with the century-old William Morris Agency in 2009 and acquiring Ultimate Fighting Championship, the world’s biggest mixed martial arts promoter, for $4 billion in 2016, with backing from Silver Lake, KKR & Co. and Michael Dell’s investment firm.

Representing talent such as tennis star Maria Sharapova and celebrity chef Bobby Flay now accounts for less than half of Endeavor’s revenue.

“We saw an opportunity to use disruption to our benefit and build a company and a platform for where the world was headed,” Emanuel, who was the inspiration for foul-mouthed and mercurial agent Ari Gold on HBO’s “Entourage,” wrote in the registration statement for the IPO.

Endeavor returned $400 million from Saudi Arabia’s investment fund after the government was linked with the killing of journalist Jamal Khashoggi.

Emanuel and Whitesell’s combined stake is composed of multi-pronged equity interests that are convertible into Class A shares. Most of it is parked in several holding companies that they control. Endeavor didn’t provide details about other executives’ stakes that are also held within those entities.

Death Benefit

Whitesell and Emanuel each will receive an annual salary of $4 million -- among the highest for chief executive officers at companies in the Russell 3000 Index -- and a life insurance policy with a $4 million death benefit.

Whitesell, the executive chairman, is also set to receive annual bonuses with a guaranteed payout of $2 million. Emanuel, the CEO, has a $6 million performance-based target bonus.

Emanuel, the brother of former Chicago Mayor Rahm Emanuel, has strong incentives to grow the market value of both Endeavor and its UFC subsidiary. He’s eligible to receive as much as $28 million of stock when Endeavor’s valuation tops $7.53 billion. For the next decade, he’ll get additional payouts of equity, each worth as much as $14 million, if the market value of Endeavor or UFC exceeds certain thresholds.

Two years ago, Endeavor repurchased $330 million of equity units from Emanuel and Whitesell.

--With assistance from Sophie Alexander.

To contact the reporters on this story: Anders Melin in New York at amelin3@bloomberg.net;Tom Maloney in New York at tmaloney38@bloomberg.net

To contact the editors responsible for this story: Pierre Paulden at ppaulden@bloomberg.net, ;Nick Turner at nturner7@bloomberg.net, Peter Eichenbaum

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