Flash Entertainment Purchases 10% of the UFC

Earlier this week, the UFC formally announced that Flash Entertainment had purchased a 10% stake in the company.

Flash Entertainment, according to multiple sources, is a wholly-owned subsidiary of Abu Dhabi.

Last week it was reported that Sheik Tahnoon Bin Zayed Al Nahyan had purchased a stake in the company himself. This is only partially true - it was actually Flash Entertainment that purchased the stake, and not the Sheik himself. There is not too much difference though, as Sheik Tahnoon Bin Zayed Al Nahyan is part of the Abu Dhabi royal family.

Both Flash Entertainment and the UFC (more specifically, Zuffa LLC) are private companies.

Private companies have no obligation to disclose their financials to the public, so we may never know the exact purchase price of the 10% stake.

Did Zuffa, LLC give Flash Entertainment a discount to what they think that a 10% stake would be worth, with the knowledge that they would be gaining a wealth of contacts and potential access to new markets with the new partnership?

Dana White had publicly gone on record as stating that Zuffa, LLC has had at least one billion dollar plus offer in the past.

Given the growth of the company over the past couple of years, and given how much money Zuffa, LLC is currently taking in just with their PPV revenues, I would find it hard to believe that the company is worth anything less than $3-$4 billion dollars at the current moment. This is obviously just speculation on my part though. The exact financial condition of the company is not known to those outside of the company.

My best guess is that Flash Entertainment paid between $200 - $300 million dollars for the 10% stake in the company.

Now, who is getting this money?

The 10% purchase is dilutive to the current shareholders (the Fertitta Brothers and Dana White). As a result of this transaction, the Fertittas now own 40.5% each (down from 45%), while Dana White now owns 9%. Flash Entertainment is now the third largest shareholder at 10%.

Zuffa, LLC issued NEW shares in the company to complete this transaction. This means that White and the Fertitta brothers didn't sell any of their shares in the company - they were simply diluted.

If this were a case of the current shareholders "cashing" out, then they would not have issued new shares in the company. They simply would have sold a chunk of the existing shares.

So, all of this money is going into the company. What happens to the money once it is in the company is anybody's best guess.

The UFC may simply be building up their cash reserves. The UFC may be planning on some kind of an acquisition. Or, maybe the UFC is going to pay down a substantial portion of the $450 million dollars in debt that they currently have. Only they know the answer to that question.

Some have said that the Fertitta brothers may have done this transaction for a reason related to Station Casinos, which is currently in Chapter 11 bankruptcy.

This doesn't make sense to me though - if they were planning on trying to raise cash to make an offer for Station Casinos via the bankruptcy process, then why would they have issued new shares in Zuffa, LLC to Flash Entertainment? Why not just sell a portion of their existing shares in the company?

This is all speculation though. One thing is for sure, the new partnership will be on display to the world at UFC 112, which is rumored to take place on April 10th in Abu Dhabi.

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