Shareholder sells lucrative stake
Endeavor aims to dispose of non-core assets as Covid-19 impacts its revenue, writes Lucas Shaw and Christopher Palmeri.
Endeavor Group Holdings, owner of a major Hollywood talent agency and the Ultimate Fighting Championship, will sell part of its stake in Epic Games, the publisher of the popular title Fortnite, raising cash it can use to prop up a business hit hard by the coronavirus.
Endeavor is selling its stake as part of Epic’s next round of fundraising, in which the company is expected to net a valuation well north of the US$15 billion ($24.8b) it received in 2018, according to sources.
The company will still hold on to some of its piece in the soaring video-game publisher, said sources, who asked not to be identified because the deal hasn’t closed.
Endeavor built a sprawling empire of media, sports and entertainment assets predicated on the growing value of live events.
It operates the mixed martial arts league UFC and stages hundreds of live events all over the world. The temporary pause on such events almost everywhere has forced Endeavor to dismiss, furlough or cut salaries for about one-third of its workforce, and prompted credit-rating firms to downgrade its debt.
Endeavor isn’t interested in selling any of its major assets, like UFC or talent agency William Morris Endeavor, but will look to dispose of non-core assets, in particular those that can reap a healthy return.
Endeavor had US$4.6b of debt at the end of June. It had sought to raise as much as $465 million through an initial public offering last year, but halted that process in October in a choppy stock market.
In the prospectus for that offering, Endeavor cited Epic as a case study for its ability to manage live events, licensing and sell media rights for the video-game company’s key title, Fortnite.
Epic’s operations have surged amid the shutdown, with kids home from school. Fortnite has more than 350 million users, the company said. They played the cartoonish every-person-forthemselves shooting game for more than 3.2 billion hours in April.
Houseparty, which integrates games and trivia into multiperson video calls, has also been a breakout hit in recent weeks.
It has been one of the most popular social-networking apps in Apple’s store every day since March 20, and co-founder Sima Sistani said it had seen more than 50 million sign-ups in the past month – about 70 times the typical amount in some markets.
Epic Games, founded in 1991 by Tim Sweeney, bought Houseparty for an undisclosed amount last June. The app’s last private valuation was about US$70m, according to Pitchbook data. While Epic has sworn off ads as a revenue source for Houseparty, it is considering offering in-app purchases, mimicking the way that games like Fortnite bring in money.
‘‘There are some companies that are really thriving in this environ ment,’’ Mamoon Amjad Hamid, a partner at venture capital firm Kleiner Perkins Caufield & Byers, said. ‘‘Companies that do work from home, or are providing some sort of entertainment.’’
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