U.S. Endeavor Returns Money to Saudi Arabia, Protesting Khashoggi Murder

There was much to celebrate last spring when Ariel Emanuel, the chief executive of the talent agency Endeavor, helped throw a splashy Hollywood party for Saudi Arabia’s crown prince, Mohammed bin Salman.

The soiree, with guests including the Disney chief executive Robert A. Iger, the Amazon founder Jeff Bezos and the former N.B.A. star Kobe Bryant, took place as Saudi Arabia’s government investment fund was completing an agreement to invest $400 million in Mr. Emanuel’s firm. The deal was meant to finance Endeavor’s growth, while diversifying Saudi Arabia’s economy via the talent agency’s work in sports, events, modeling and television and film production.

Less than a year after the star-studded party, Endeavor and Saudi Arabia have gone through a messy breakup, set in motion by the murder last October of the Saudi journalist Jamal Khashoggi.

In recent weeks, Mr. Emanuel’s firm returned the $400 million investment, effectively severing Endeavor’s relationship with Saudi leaders, according to two people with knowledge of the transaction.

It is one of the few instances of a major company halting business with the wealthy kingdom to protest its agents’ assassination of a journalist.

A spokesman for Saudi Arabia’s Public Investment Fund, or PIF, which made the investment in Endeavor, did not respond to repeated requests for comment. Neither did Mr. Emanuel.

Prince Mohammed has worked to turn the fund into a global investment giant whose profits can reduce the kingdom’s dependency on oil. On a high-profile tour of the United States last spring, the prince met with politicians, business leaders and celebrities. Many hailed him as a valuable business partner and a potentially transformative figure in the Middle East.

On the prince’s American trip, the fund signed deals with the movie-theater company AMC and the amusement-park operator Six Flags to expand into Saudi Arabia. And it completed the investment with Endeavor, an alliance that Prince Mohammed hoped would lift the kingdom’s nascent entertainment sector.

Saudi Arabia’s crown prince, Mohammed bin Salman, visiting Virgin Galactic. Richard Branson, left, has suspended talks with a Saudi fund over potential investments in his space-travel businesses.

Saudi Arabia’s crown prince, Mohammed bin Salman, visiting Virgin Galactic. Richard Branson, left, has suspended talks with a Saudi fund over potential investments in his space-travel businesses.CreditBandar Algaloud/Saudi Kingdom Council, via Anadolu Agency, via Getty Images

Then Mr. Khashoggi’s murder in October led to an international outcry.

Richard Branson, founder of the British media and technology conglomerate Virgin Group, suspended talks with the Saudi fund over potential investments in his space-travel businesses. Executives from the private-equity firm Blackstone Group, the ride-sharing service Uber and Goldman Sachs canceled plans to attend a major investment conference in Riyadh, the Saudi capital.

Mr. Emanuel joined the chorus. At an industry event in Cannes, France, on Oct. 15, he called the Khashoggi disappearance, about which many details had not yet emerged, “very, very concerning, really concerning. It’s upsetting.”

Privately, Mr. Emanuel informed officials with the Saudi fund that he intended to return the $400 million that it had invested. Worried about the Saudi reaction, he began traveling at times with bodyguards, according to a person briefed on the matter.

Mr. Emanuel canvassed other investors, including some who already had put money into Endeavor, to help fill the void that would be left when the firm returned the Saudi money, according to the two people familiar with the talks, including one who is an Endeavor investor.

The process wrapped up in the past few weeks, with Endeavor investors kicking in money and the company repaying Saudi Arabia.

Endeavor’s clean break with the kingdom has made it an outlier in the business community.

Despite the American sanctions against 17 Saudis said to have been involved with Mr. Khashoggi’s killing, on top of the public outcry, most of the kingdom’s overseas partnerships have remained intact. Blackstone is using billions of dollars of Saudi money to invest in United States infrastructure projects. The asset manager BlackRock has said it will continue to manage Saudi funds. And Uber and other companies that accepted money from the Saudi government have not indicated any plans to return it.

“People still want sovereign wealth fund money,” said Michael Maduell, president of the Sovereign Wealth Fund Institute, which provides research on government investment funds.

Greg Fairchild, who teaches business ethics at the University of Virginia’s Darden School, said there was a strong argument for corporate leaders to follow Mr. Emanuel’s lead.

While it might hurt in the short term, he said, “you can look in the mirror and say, ‘We’re just not involved in that.’”