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Ownership of UFC sells 10 percent stake

Owners of the Ultimate Fighting Championship have sold a 10 percent stake to a Middle Eastern entertainment company to bolster the mixed-martial arts league’s ability to expand throughout that region and other areas of the world, UFC’s owners confirmed Monday.

The stake in Las Vegas-based Zuffa was bought by Flash Entertainment, a wholly owned subsidiary of Abu Dhabi, the capital and second-largest city of the United Arab Emirates and home for the country’s ruling family. Zuffa, which owns the UFC and its sister league, World Extreme Cagefighting, declined to disclose financial terms.

Zuffa Chairman and Chief Executive Officer Lorenzo Fertitta said the sale will help the company accelerate its international growth plans because of Flash’s relationships in Asia.

“We’ve had a lot of growth over the last five years in the United States and Canada,” Fertitta said. “One of our initiatives has been to grow this global brand around the world. What they will allow us to do is grow a lot faster in places like the Middle East as well as places like Southeast Asia and China and throughout that region.”

Ossama Khoreibi, chairman of Flash Entertainment, said his company was impressed by Zuffa’s commitment to growing the league’s base.

Additionally, the partnership could raise Abu Dhabi’s profile as an entertainment destination, he said.

“This partnership provides further proof of our company’s bold ambitions,” Khoreibi said in a statement.

Fertitta said Zuffa approached Abu Dhabi about seven months ago about hosting an event in the region.

“Those talks progressed to where they approached us about making a strategic investment in the overall company,” Fertitta said.

The UFC has been on television and pay-per-view in the region.

“We’re hoping to do an event in Abu Dhabi in 2010,” Fertitta said. “We’ve had a relationship going on with them for nearly two years. It’s been one of those situations that has progressed over time and finally culminated with them making an investment in the company.”

Abu Dhabi controls the world’s largest sovereign wealth fund, estimated between $400 billion and more than $875 billion. The United Arab Emirates is the world’s third-largest oil producer, according to The Associated Press.

Zuffa carries $450 million in debt, including a $25 million credit facility due in 2012 and a $425 million loan due in 2015, according to a November report issued by Moody’s Investors Service. Moody’s, however, said Zuffa’s income, which comes largely from events and pay-per-view receipts, should be sufficient to make its debt payments.

Moody’s said Zuffa’s financial outlook is stable with good growth prospects.

“(Mixed-martial arts) is among the fastest-growing sports today and is well positioned for advertisers that seek to reach males in the 18 to 34 age demographic,” Moody’s analyst Neil Begley said in a Nov. 10 investors’ note. “As a result, revenue growth is expected to remain strong for the intermediate term.”

Fertitta said the company “is very sound and very healthy” financially.

Before the new investment, Zuffa was 90 percent owned by Lorenzo and his brother, Station Casinos CEO Frank Fertitta III. The remaining 10 percent was owned by Zuffa President Dana White. The new ownership split was not available.

Contact reporter Arnold M. Knightly at aknightly @reviewjournal.com or 702-477-3893.

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