A group of WWE investors has filed a class-action lawsuit challenging the $21 billion WWE-UFC merger.
The complaint makes a series of allegations, including that Vince McMahon “used his domineering personality and control over WWE” to make a deal that unfairly benefitted himself and his inner circle.
The news was reported by Bloomberg Law on Monday afternoon. The public version of the lawsuit was filed on November 22nd, although a sealed version was submitted on November 17th in Delaware’s Court of Chancery.
There was further reporting on the case by The Hollywood Reporter later on Monday.
The complaint states: “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 complainants are the Laborers’ District Council and Contractors’ Pension Fund of Ohio. According to them, the deal that resulted in the creation TKO was not the best option for WWE.
McMahon and others breached their fiduciary responsibility, they claim. Also named in the lawsuit are Nick Khan, Paul Levesque, George Barrios, Steve Koonin, Michelle Wilson and Frank Riddick. Neither TKO nor Endeavor are named.
Vince McMahon returned to WWE to pursue “strategic options” for a sale or merger in January 2023. This came after “resigning” in June 2022 amid a sexual misconduct investigation into $17.4 million in hush-money payments to four women.
McMahon, as WWE’s controlling stockholder, removed and replaced three board members with himself and former executives George Barrios and Michelle Wilson.
The suit alleges that McMahon, “maneuvering to secure his power and control over the company in the face of mounting stockholder discontent and government investigations,” turned down higher offers in favor of a deal with Endeavor CEO Ari Emanuel, his “close friend and longtime ally.”
A board unfairly stacked with McMahon loyalists “conjured up a sham sales process designed to favor Endeavor and exclude other bidders seeking to axe McMahon,” the suit claims.
The complaint alleges that Vince McMahon and his allies timed negotiations to benefit Endeavor, offering them advantages such as early due diligence and insider information. This approach enabled Endeavor to make an early offer for the merger, it is claimed.
The lawsuit also states that the $21 billion price tag in that deal undervalued WWE. It was “far below the offers” that the board would have received from multiple other bidders if there had been “any effort to negotiate in good faith,” the investors claim.
Bidders other than Endeavor, which are redacted in the complaint, would have outdone the TKO deal with all-cash offers, states the lawsuit. The plaintiffs also claim that one of those suitors had “significant runway to increase its offer due to the outsized synergies it could generate.”
Those offers were never properly considered, it is claimed, because they would have resulted in McMahon’s exit.
WWE investors now hold 49% of the new parent company, TKO Group.
This is not the first lawsuit filed against McMahon by shareholders. Recently, WWE investors sued the company and McMahon over his January return to the company. That suit was dropped after McMahon repaid the company $17.4 million toward the fees associated with the special investigation into the hush-money payments and sexual assault allegations.
The company has yet to comment on the lawsuit, according to both Bloomberg Law and The Hollywood Reporter.