The tens of thousands of fans who crowded into SoFi Stadium in Los Angeles for WrestleMania this weekend got to watch the wrestling icon John Cena be hurled to the canvas by Austin Theory, one of World Wrestling Entertainment’s biggest stars.
Offstage, bankers and executives huddled in conference suites at the stadium to put the finishing touches on a new plot for W.W.E.’s future. Endeavor, an entertainment colossus run by the Hollywood power broker Ari Emanuel, was finalizing a deal to acquire W.W.E. and merge it with Ultimate Fighting Championship, the combat sports league Endeavor owns.
News of the deal, which aims to create a new public company worth more than $21 billion, broke Sunday before the second night of WrestleMania, with Mr. Emanuel in attendance alongside Vince McMahon, the executive chairman of W.W.E. The companies announced the deal Monday morning, saying the as-yet unnamed firm — whose stock will trade under the symbol “TKO” — would be a juggernaut in live entertainment and combat sports. The deal is expected to close near the end of the year, pending regulatory approval.
“Must-watch TV is a rarity these days,” said Mark Shapiro, Endeavor’s president and chief operating officer, who will also have those roles at the new company. “And unicorns like the U.F.C. and W.W.E. will be heavily in demand.”
In fusing Ultimate Fighting Championship with World Wrestling Entertainment, Mr. Emanuel and Mr. McMahon are betting that traditional TV companies and video-streaming giants will continue to pay top dollar for the rights to show live events — including scripted and unscripted fights.
Recent deals for live sports bear that out. The National Football League in December struck an agreement with YouTube TV that values its Sunday Ticket package of games at as much as $2.5 billion annually — an increase of about $1 billion from the deal with its previous partner, DirecTV. The National Basketball Association is expecting to sharply increase its fees after its TV agreements expire following the 2024-25 season.
The intense competition between cable TV and deep-pocketed tech companies is behind the ballooning costs. As viewers abandon traditional television in droves, live events like N.F.L. games and W.W.E. matches continue to draw big ratings, helping anchor the cable TV business. And tech giants like Amazon and Alphabet are using live sports to draw new subscribers to their services, creating a bidding war with their traditional rivals.
Executives aim to use the tie-up of W.W.E. and U.F.C. to take advantage of that demand. U.F.C.’s contract with the Walt Disney Company’s ESPN division ends in the next few years, and W.W.E.’s deals with NBCUniversal’s U.S.A. network and the Fox broadcast network are set to expire next year.
The combination is the latest in a series of audacious deals struck by Mr. Emanuel, the workaholic Hollywood talent agent who rose from the mailroom to become one of the entertainment industry’s most important figures. Mr. Emanuel will be the chief executive of the new company and will keep his chief executive title at Endeavor, which will continue to own other businesses, including the William Morris Endeavor talent agency and the Professional Bull Riding league.
The deal also provides a coda to a tumultuous chapter in Mr. McMahon’s career. He was reinstated as executive chairman of W.W.E. in January after resigning from that position last year following an investigation into allegations of sexual harassment. Mr. McMahon will stay on at the new company as executive chairman, part of an 11-person board that will include six members from Endeavor and five members from W.W.E.
The Wall Street Journal reported last June that Mr. McMahon agreed to pay a secret $3 million settlement to an employee with whom he was said to have had an affair, and that the board had been investigating since April last year. The investigation unearthed other nondisclosure agreements involving claims of misconduct by Mr. McMahon.
Mr. McMahon acknowledged the harassment claims in an interview on Monday from Endeavor’s Los Angeles offices, saying that he had erred over the last half-century.
“I’ve made mistakes in my 50-year career, both in business and personally, and I’ve always owned up to them,” he said.
Mr. Emanuel said that he believed in “due process,” adding that Mr. McMahon “takes full responsibility for what happened.”
Dana White, the president of U.F.C., will keep that role at the combined company, and Nick Khan, the chief executive of W.W.E., will stay on as president. Patrick Whitesell, the prominent Hollywood executive and agent who represents actors including Matt Damon and Ben Affleck, will remain executive chairman of Endeavor.
Stephanie McMahon, Mr. McMahon’s daughter and the former co-chief executive of W.W.E., will not have a role at W.W.E. after the deal, Mr. McMahon said, but Paul Levesque — W.W.E.’s chief content officer also known by his wrestling name, “Triple H” — will continue to work in that capacity.
The deal puts a hefty valuation on U.F.C., which Endeavor and its backers purchased for about $4 billion in 2016, and W.W.E., which was seeking about $9 billion in a deal. The all-stock deal values U.F.C. at $12.1 billion and W.W.E. at $9.3 billion. Mr. Shapiro said that the competitive sale process W.W.E. ran justified its “healthy price,” along with the potential for a lucrative deal in its upcoming rights negotiation.
In the interview, Mr. Emanuel was enthusiastic about the possibility of creating shows and movies from W.W.E. characters, calling them “superheroes.”
Mr. Emanuel described the company’s intellectual property rights as “some of the greatest I.P. in the world.” Endeavor is also betting the price tag will be justified by businesses other than rights. Mr. Shapiro said that the company’s capacity to sell sponsorships, create new events and strike deals with social media companies would contribute to its value.
The deal for W.W.E. came together quickly. Over the past several weeks, Mr. Emanuel and Mr. Shapiro visited W.W.E.’s headquarters in Stamford, Conn., and the offices of the investment bank the Raine Group in New York to finalize the details of the agreement. On Sunday, as WrestleMania reached its conclusion, Endeavor and W.W.E. pinned down the final details.
Although Mr. Emanuel was one of the inspirations for the super-agent Ari Gold on the HBO show “Entourage,” he said he wasn’t likely to appear as a character in the W.W.E.’s story universe in the way that Mr. McMahon has.
“I’m a character already in my own mind,” Mr. Emanuel said. “I don’t need to share that with anybody.”
