WWE agrees to merge with UFC to create a new company run by Ari Emanuel and Vince McMahon

Vince McMahon's World Wrestling Entertainment has agreed to merge with UFC to form a new publicly traded company controlled by Endeavor Group, the companies announced Monday morning.

Endeavor will own a 51% stake in the new combat sports and entertainment company, while WWE shareholders will have the remaining 49%, according to the terms of the agreement. The deal values WWE at $9.3 billion and UFC, which is owned by Endeavor, at $12.1 billion, the companies said in a press release.

Shares of WWE and Endeavor both fell Monday morning. The transaction is expected to close in the second half of 2023.

Ari Emanuel will act as chief executive of both Endeavor and the new company, the companies said. McMahon, likewise, will be executive chairman, while Endeavor President and COO Mark Shapiro will also work in the same roles at the new company. Dana White will remain as president of UFC, and WWE CEO Nick Khan will stay on as president of the wrestling business.

"This is going to be UFC 2.0," Emanuel said in an interview that aired Monday on CNBC's "Squawk on the Street."

The board will consist of 11 people, six appointed by Endeavor and five by WWE. The merged company's name will be announced at a later time. The company will trade on the New York Stock Exchange under the ticker TKO.

The announcement confirmed an earlier CNBC report. It also came a day after WWE wrapped up its flagship live event, WrestleMania, in California. The company has spent the past several months looking for a buyer. McMahon returned to the company as chairman in January to oversee the process. WWE has a market valuation of about $6.5 billion. Endeavor has a market cap of about $10 billion.

The agreement would pair two of the biggest sports entertainment brands in the world.

Despite notable differences – WWE features scripted matches and soap opera-like storylines, while UFC showcases authentically brutal mixed martial arts fighting – the organizations share similarities in terms of content and culture. Several UFC fighters, including Ronda Rousey and Brock Lesnar, have already wrestled for WWE.

UFC champion and superstar Conor McGregor lauded news of the pending deal Sunday evening. "Incredible. What a powerhouse!" he said in one tweet, following up with another tweet displaying an image of him brandishing UFC and WWE championship belts.

WWE offers Endeavor's shareholders a muscular media and live events business, as well as decades worth of intellectual property. The company generated $1.29 billion in revenue last year, driven mainly by its $1 billion media unit.

Endeavor "knows the business" of WWE, Emanuel said in a recorded investor presentation on Monday. WWE's media rights deals for traditional TV and streaming are up for renewal in the coming months. Endeavor owns the WME talent agency and has used its expertise in media rights, celebrity and live events to grow UFC's revenue to $1.3 billion last year, up 20% from a year earlier. The company plans to run "the same playbook" with WWE, Emanuel said.

"We have a track record of success with media rights," Emanuel said. "WWE has similar scale to UFC. In the universe of assets at this scale, the opportunity is rare and finite."

Comcast's NBCUniversal has an existing cable TV and streaming deal with WWE. Fox also has a separate media deal with WWE. The combined company may also explore new direct-to-consumer opportunities, Emanuel said.

Emanuel told CNBC he asked McMahon to stay with the combined company as executive chairman. McMahon said he didn't have to be convinced to stick around with what's been a family business for decades.

McMahon's father founded WWE in its original incarnation during the middle of the 20th century. McMahon, who bought the company from his father in 1982, is the controlling shareholder. Over the past four decades, WWE has grown into a global phenomenon, spawning breakout stars such as Hulk Hogan, Dwayne "The Rock" Johnson, Dave Bautista and John Cena.

"It's a great day," said McMahon. "Things have to evolve. Family businesses have to evolve for all the right reasons."

McMahon, 77, retired from the company in July following a string of revelations that he paid several women millions of dollars over the years to keep them quiet about alleged affairs and misconduct. Over the summer, WWE acknowledged that other entities were investigating the hush payments. The Wall Street Journal had reported about federal probes into the matter.

McMahon's daughter, Stephanie McMahon, became co-CEO alongside Khan. Paul Levesque, who's both Stephanie McMahon's husband and the wrestler known as Triple H, took over creative duties from Vince McMahon.

After Vince McMahon came back in January, Stephanie McMahon stepped down and Khan fully assumed the CEO role. The elder McMahon recently locked in a two-year employment contract, according to a securities filing.

"I've made mistakes both personally and professionally," McMahon acknowledged in his CNBC interview.

McMahon told CNBC he won't be "in the weeds" with WWE's creative decisions when the companies merge.

Khan in recent weeks has been making the media rounds to discuss the potential sale. He told CNBC's Morgan Brennan on Thursday that there's been a "robust" process that drew many interested buyers. Emanuel reiterated to CNBC that the sale process was "competitive."

WWE also fits well with the cultures of Endeavor and UFC, which also reflect their leaders' hard-edged styles. McMahon, Emanuel and White are known for their outsized personalities, and each has their share of devoted allies and and harsh critics.

White is no stranger to scandal, either. Earlier this year, video emerged showing the UFC boss slapping his wife during a public argument at a New Year's Eve party in Mexico. He later apologized.

Disclosure: NBCUniversal is the parent company of CNBC.