Lawsuit accuses WWE of ‘sham’ before UFC merger
STAMFORD — WWE’s merger earlier this year with mixed-martial arts firm UFC was an unfair deal that sought to maintain the power of WWE founder Vince McMahon, at the expense of company shareholders, according to a new class-action lawsuit filed by an Ohio pension fund against him and several others.
Filed publicly last week in Delaware Chancery Court, the lawsuit alleges that McMahon’s influence over WWE’s board of directors resulted in “a sham sales process designed to favor (UFC’s parent company) Endeavor and exclude other bidders seeking (to) axe McMahon.”
“In sum, defendants breached their fiduciary duties by allowing McMahon to prioritize his own personal interests above those of WWE’s former public stockholders to their financial detriment,” reads part of the lawsuit filed by the Laborers’ District Council and Contractors’ Pension Fund of Ohio.
Messages left Tuesday for WWE and TKO Group Holdings, the new parent company created through the merger of WWE and UFC, were not immediately returned.
Much of the lawsuit focuses on the controversies involving McMahon in the past couple of years. In July 2022, then age 76, McMahon announced his retirement as WWE’s CEO and chairman, amid an investigation by the company’s board of directors of his alleged misconduct and after the publication of several articles by The Wall Street Journal that revealed the accusations against him. The Journal reported that McMahon agreed to pay four women a total of more than $12 million over the past 16 years to keep secret allegations of sexual misconduct and infidelity, citing unnamed people familiar with those agreements and related documents.
McMahon subsequently decided that he wanted to come back to WWE, which he and others, including his wife and
former CEO Linda McMahon, have built into a global business in the past 40 years. In January, he used his status as WWE’s controlling shareholder to return to the board, a process that also involved him bringing back two former WWE co-presidents to serve on the board and removing three board members. Two other board members resigned because they opposed McMahon’s return.
Right after McMahon’s return to the board, his daughter, Stephanie McMahon, a longtime company executive who had served as co-CEO and chairwoman during her father’s
retirement, stepped down from those positions.
When McMahon rejoined WWE, the company announced that it would undertake a “strategic review” of its long-term options. WWE then received several offers to acquire the company that, “contemplated cashing out WWE stockholders (including McMahon, signaling his complete ouster from the company and likely the wrestling world),” the complaint said.
But the WWE board negotiated exclusively with Beverly Hills, Calif.-based Endeavor, whose CEO is Ari Emanuel, described
as a “long-time friend” of McMahon, according to the lawsuit. WWE’s counter-proposed an all-stock deal that ultimately required McMahon serve as executive chairman of the combined company, according to the complaint.
“Not only did he secure a future for himself at post-merger WWE, McMahon also stuffed his pockets and those of his loyalists before agreeing to a deal,” the lawsuit said.
In particular, McMahon ensured that he and Nick Khan, now WWE’s president, receive “lucrative golden parachutes,” according to the complaint. The lawsuit also asserts that, before a deal was signed with Endeavor, WWE’s board granted cash bonuses of $15 million to Khan; $5 million to Paul “Triple H” Levesque, WWE’s chief content officer and the husband of Stephanie McMahon; and $5 million to WWE’s then-chief financial officer, Frank Riddick III. In addition to McMahon, several other defendants, including Khan, Levesque and Riddick, were also named as defendants in the lawsuit.
In early April, WWE and Endeavor announced an agreement to form a new, publicly traded company, worth more than $21 billion, that would consist of WWE and UFC. The deal was completed in September, and WWE and UFC now operate as part of TKO Group Holdings. McMahon serves as executive chairman of TKO.
“As to price, the merger consideration did not reflect the fair value of the company,” the complaint states. “Before synergies, it fell below the initial cash-out offers submitted by (parties whose names were redacted from the public version of the lawsuit) and likely far below the offers the board could have obtained from those bidders had it made any effort to negotiate with them in good faith.”
Among other recent developments, TKO announced earlier this month that McMahon would sell about $700 million of his stock in the company.
At the same time, McMahon faces other issues. In July, federal law-enforcement agents executed a search warrant and served him with a federal grand jury subpoena.
“No charges have been brought in these investigations,” WWE said in its secondquarter report, which was submitted to the Securities and Exchange Commission. “The company has received voluntary and compulsory legal demands for documents, including from federal law enforcement and regulatory agencies, concerning the investigation and related subject matters.”
WWE and McMahon have said that they are cooperating with government officials.