Stake in Zuffa up for Sale [Update]

In the above video Dana White told Bloomberg TV that 10-15% of the UFC is up for sale.

This isn't the first time some Zuffa financial news has taken the MMA blogosphere by storm. Remember when we found out Mark Cuban was a Zuffa bondholder. But that doesn't mean we can't parse this latest Zuffa financial news.

The Fertitta's own 90% of Zuffa while Dana White holds 10%. With Zuffa ownership open to sell a 10-15% silent stake (read as: your a yes man with money) in the company though it is unknown how much of White's share would be sold if any at all.

For those freaking out that this is like Jurassic Park without Steven Spielberg or Buffy without Joss Whedon or Halo without Bungie relax. This possible sale is for a minority share.

So why has Zuffa decided to sell up 15% of the company to a silent investor ?

In the realm of wild speculation WKR has two hypothesis about the sudden availability of Zuffa ownership.

First, the UFC is stil undergoing a period of expansion. They held their first event in Germany earlier this summer and will be holding their first event in Australia in early 2010. Not to mention the amount of capital Zuffa has eaten in their attempt at expansion in the United Kingdom. Finding a silent owner will raise a large amount of capital to reinvest in the business.

On the other hand it could be something to do with Fertitta's themselves

The Fertitta's are still dealing with the economic troubles from their family business. The Fertitta-owned Station Casinos filed for bankruptcy back in July. The Fertitta's own 25% of Station Casinos and took it private back in 2007 for a buyout sum of $5.4 billion (that's a lot of money). With Station Casinos now in Chapter 11, plus the economic downturn, which hit Vegas particularly hard, it is quite possibly that the Fertitta's want to see a bigger pay off from their investment in the UFC as they probably aren't having the best financial year. Zuffa did take out a $100 million loan to pay dividends to the owners.

This may sound outlandish but MMA Payout corroborates part of our paranoid schizophrenia.

I'm not sure that this should come as an absolute shock to anybody given the financing decisions that Zuffa has made in the past 18 months. White and the Fertittas have been using loans to issue dividend disbursements in order to realize some of the gains they've made in holding the company through its tremendous growth.

Selling a 10-15% silent stake in the company would further allow the ownership to realize their return; and, may I add, at an undisclosed price that they feel represents fair market value.

The real question here is, what do Lorenzo, Frank, and Dana believe Zuffa to be worth? You can bet the answer isn't founded upon pessimistic projections of future growth and earnings.

Anybody looking to grab a 10% stake in the company is going to have to pay over $100 million at this point.

I hope you have a big piggy bank.

[Update: Note by Zak Woods, 10/20/09 11:45 AM EDT ]

Dana White says no dice on a minority sale, 

"This is [expletive] bad; it’s not what I said. Here’s the bottom line: Basically, it was a longer story and he kept asking if we would sell this thing or not. I kept saying ‘No. No, we won’t sell it,’ and I’d go through this whole [expletive] thing about how we’re all 40 years old and we’re young and we’re the visionaries for this thing. We know where we’re taking this thing. We know where it’s going. We have no interest in selling it. And going public? We don’t need the [expletive] money. You go public when you want to raise cash. You raise capital to do something bigger. We don’t want to do that. We’re not looking to do that. He kept [expletive] pushing and pushing. He said, ‘OK, hypothetically speaking, would you ever sell a piece of it?’ I said, ‘I guess we’d sell a tiny little piece. We’d probably sell a tiny little piece.’ But, here’s the thing: I want it to be known that this guy kept pushing me and pushing me. I said ‘No, we wouldn’t go public. No, we wouldn’t sell it.’ At the end of the day, we’re the guys who are driving this thing. We have the vision. We know where we want to take this thing. We’re not interested in selling a piece of this to anybody. Me, Frank and Lorenzo are the three owners. We have an awesome relationship. Everything runs smoothly. It’s perfect. And for us to even offer somebody a piece, it would be the biggest compliment in [expletive] history because they’d have to be a serious strategic partner. It’s the only [expletive] way we’d do it."