In a major development in the corporate wrestling world, a group of former WWE shareholders has initiated a class-action lawsuit against key members of WWE's board, including Vince McMahon and Paul "Triple H" Levesque. This legal action, filed in Delaware Chancery Court, alleges that the recent merger between WWE and Endeavor's UFC, forming TKO Group, was a product of a manipulative sales process that favored Endeavor unfairly while ensuring McMahon's continued leadership role.
The lawsuit, which became public on Monday, accuses the defendants of breaching their fiduciary duties. The shareholders claim that the board, led by McMahon, orchestrated a deal specifically tailored to benefit Endeavor, sidelining other potential bidders who were interested in removing McMahon from power.
This development comes in the wake of McMahon's 2022 exit as WWE president and CEO, following allegations of sexual abuse and harassment. The complaint details how McMahon, after being ousted, re-entered the company with a new board and spearheaded a "strategic review process," ostensibly to sell the company.
However, the suit argues that this was a strategic move by McMahon to maintain his grip on the company amid growing shareholder dissatisfaction and ongoing government investigations into his alleged misconduct.
Merger Ethics Questioned
The suit further alleges that McMahon promptly reached out to his close acquaintance, Endeavor CEO Ari Emanuel, to negotiate a deal that would keep him at the forefront of the merged entity.
According to the filing, WWE began engaging with potential buyers in early February 2023. Endeavor quickly proposed a merger, offering a deal where WWE stockholders would receive approximately $88.43 per share. However, the lawsuit reveals that there were other higher bids for WWE, with three undisclosed parties offering more lucrative cash deals, ranging from $76.83 to $100 per share.
Despite these higher offers, the board, allegedly under McMahon's control, did not counter these proposals as they implied McMahon's complete exit from WWE and possibly the wrestling industry. The eventual all-stock merger, finalized in September, saw the formation of TKO Sports, with Endeavor holding a 51% stake and former WWE shareholders owning 49%.
The merger valued former WWE stockholders' shares at $95.66 each, lower than the initial cash offers from the other bidders. The deal appointed Emanuel as CEO of TKO and McMahon as its executive chairman, with Nick Khan, another defendant in the suit, named WWE's president.
TKO Sports commenced trading on the NYSE on September 12. This lawsuit marks a significant challenge to the merger, questioning the ethics and legality of the process and decisions that led to the creation of TKO Sports.