Minority interest sold in UFC parent company

Zuffa LLC, the parent company of the Ultimate Fighting Championship, announced on Tuesday the completion of a deal in which a 10-percent interest in the company to the Abu Dhabi government-owned Flash Entertainment.

UFC president Dana White confirmed the stock purchase, for an undisclosed price, after approximately eight months of negotiations. White said it was a strategic partnership for the purpose of expanding the company on an international front.

"They paid fair market value of the company, and they put up for 10 percent of it," said White. "They can get us into places it would take us five, six or seven years to get into, and some places we may have never been able to get into," he said. "As far as global strategy, they can get us into China right now which would have taken us a long time."

White noted the company has over the past several years turned down many offers to purchase the privately held company, which has been valued in many business journals at more than $1 billion and also includes sister promotion World Extreme Cagefighting. White has claimed in the past that he and co-owners Lorenzo and Frank Fertitta turned down a $1.2 billion offer for the company.

"None of those other offers even made sense," he said. "We got offers from big networks and private equity guys. We don’t need the money. Nobody offered us anything we couldn’t do ourselves."

White had said many times the UFC brand of mixed martial arts would become the largest sports franchise in the world, believing that it would export to new markets better than sports like football, soccer and basketball. He also acknowledges that most people consider him crazy for making such statements.

"All those things I’ve said about where we’d be in 10 years and everyone said I was crazy, now we’ll be there even sooner."

Flash Entertainment was formed two years ago by the Abu Dhabi government’s Executive Affairs Authority, which brings big-name entertainment and sporting events to the United Arab Emirates and the city, including big-name concerts, Formula 1 racing, and in recent weeks, a Rihanna New Year’s Eve concert and the Capitala World Tennis Championship.

There has been talk of a UFC event in Abu Dhabi on April 10. White said this deal guarantees a UFC event will be held in the city, but said the specific date has not been finalized.

With the sale, company ownership would be 40.5 percent held by Lorenzo Fertitta, the company’s CEO and Chairman, 40.5 percent held by his older brother, Frank Fertitta III, 10 percent by Flash Entertainment and 9 percent by White.

"These are young, hip, guys who share our passion for the sport," he said.

Sheikh Tahnoon Bin Zayed Al Nahyan, who is affiliated with Flash Entertainment, is an MMA fanatic who promoted early world submission grappling championship events through the Abu Dhabi Combat Club. He was attending college in the U.S. and saw the first UFC event live in 1993.

Al Nahyan later studied jiu-jitsu under Renzo Gracie, opened up his own martial arts facility at home, and promoted a submission tournament featuring many of the biggest name fighters in the world in 1998.

UFC recently signed the veteran Gracie to a contract, and if the event on April 10 goes off in the UAE, Gracie is expected to be one of the headliners in a match against Matt Hughes.

The Fertitta brothers purchased the UFC in 2001 for $2 million from Semaphore Entertainment Group, which founded the company in 1993 as a partnership with ad executive Art Davie and Rorion Gracie, the older brother of the first UFC champion, Royce Gracie. When the company became popular on pay-per-view television, Semaphore bought out Davie and Gracie and took full control in 1995 of what at the time appeared to be a company with a good future.

However, Semaphore spent the next several years fighting and losing political battles, with many states refusing to allow events, many commissions refusing to sanction them and the major cable television companies refusing to air the events on pay-per-view, crippling the sport. This came at the same time the popularity of similar events was exploding in Japan, where most of the bigger-name fighters headed.

Fertitta and White struggled early after purchasing the company, losing a reported $44 million in the early years. The company started paying off after the 2005 reality show, "The Ultimate Fighter," led to a rapidly growing interest in the events. Pay-per-view numbers and television ratings exploded the next year on the backs of stars such as Chuck Liddell, Randy Couture, Tito Ortiz, Ken Shamrock, Matt Hughes and Royce Gracie.

In 2009, the UFC broke its own records (set one year earlier) as the biggest pay-per-view franchise in history, putting on 13 pay–per-view events that grossed approximately $349 million. By comparison, boxing's biggest year was 2007, at $255 million. Most important, a new generation of stars such as Brock Lesnar, Frank Mir, Georges St. Pierre, Forrest Griffin and B.J. Penn have become strong pay-per-view draws, indicating the sport was not a short-lived, television-created fad and that it had the legs to become a permanent part of the mainstream sports scene.

The company carries $450 million in debt based on loans taken out to fund company growth. There is a $25 million credit facility due in 2012, and a $425 million loan due in 2015.

"As far as the fans go, everything is the same," said White, whose company on Sunday promoted a live WEC event in Sacramento, Calif., and Monday held a sold-out Spike television special from the Patriot Center in Fairfax, Va.