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Private equity firm Apollo to buy Verizon Media assets for $5B, will rename business 'Yahoo'

Brian Heater and Ingrid Lunden
·6-min read

Following several days of negotiation and rumors, Verizon today announced that it has entered an agreement to sell its media assets to private equity firm Apollo Global Management for $5 billion. Apollo will be paying Verizon $4.25 billion in cash, along with preferred interests of $750 million, and Verizon will keep 10% of the company.

The new company, when the deal is complete, will be known simply as Yahoo, and it will continue to be led by current CEO Guru Gowrappan and from what we understand the plan involves pursuing opportunities across content, commerce and betting. The division's existing footprint spreads across a variety of internet brands, publishing (including us, TechCrunch) and advertising.

"After a strategic review, Guru and I discussed, and believed, that the full value of Media’s offerings have yet to be unlocked," Hans Vestberg noted in an internal memo to employees at Verizon. "Apollo has a powerful vision that includes aggressively pursuing growth areas in commerce, content and betting. One that also features synergies with many of the traditional brick-and-mortar companies in their portfolio who can benefit from Media’s e-commerce platform. What made Apollo’s offer so appealing, is that it includes leveraging the entire Verizon Media ecosystem of adtech, affiliate relationships, data, insights, targeting and reach."

“We are excited to be joining forces with Apollo,” said Gowrappan, CEO, Verizon Media, in a statement. “The past two quarters of double-digit growth have demonstrated our ability to transform our media ecosystem. With Apollo’s sector expertise and strategic insight, Yahoo will be well positioned to capitalize on market opportunities, media and transaction experience and continue to grow our full-stack digital advertising platform. This transition will help to accelerate our growth for the long-term success of the company.” (Gowrappan will be getting a cash retention award of $3 million, Verizon said today, if he stays on for six months after the deal closes.)

“We are thrilled to help unlock the tremendous potential of Yahoo and its unparalleled collection of brands,” said Reed Rayman, private equity partner at Apollo, in the same statement. “We have enormous respect and admiration for the great work and progress that the entire organization has made over the last several years, and we look forward to working with Guru, his talented team, and our partners at Verizon to accelerate Yahoo’s growth in its next chapter.”

Although Verizon is retaining a stake, its divestment signifies a formal retreat for the telecoms giant, away from its expensive effort to take a stronger role in efforts to own, build and monetize content on top of its own and others' networks.

The news today caps off days, weeks, months and arguably years of speculation about the future of the media business under Verizon. The price Apollo is paying is in line with reports of the deal in recent days, which collectively pegged the deal at around $4 billion-$5 billion.

Those figures may sound big, but not when compared to what Verizon originally paid: a combined $9 billion+ respectively first for AOL in 2015 and then Yahoo in 2017.

The former deal brought AOL and its various media holdings -- including The Huffington Post, TechCrunch, Engadget -- under the VZW umbrella, while the latter added the iconic Yahoo search portal along with a slate of Yahoo services and Tumblr, resulting in a curious mix of newer services skewing to younger audiences mixed with a number of legacy internet properties, plus some experimental efforts thrown into the mix. (And some of those newer efforts are still a part of the process: Verizon notes that Yahoo News is currently the fastest-growing news organization on TikTok.)

After the acquisition, the two companies were merged under the umbrella of a new brand, Oath, part of a bigger strategy that Verizon had to grow a media empire to help it take on online ad giants like Google and Facebook, with the operation run by Tim Armstrong, who had been AOL's longtime CEO going into the Verizon acquisition.

Ultimately, it never quite played out as Verizon thought that it would, or at least not as quickly as it had hoped.

Hans Vestberg -- a longtime telecoms executive who first joined Verizon as CTO in 2017 -- became the CEO in June 2018. In doing so, he essentially inherited a digital media business strategy that he had no hand in building.

“Verizon Media has done an incredible job turning the business around over the past two and a half years and the growth potential is enormous,” Vestberg said in a press release. “The next iteration requires full investment and the right resources. During the strategic review process, Apollo delivered the strongest vision and strategy for the next phase of Verizon Media. I have full confidence that Yahoo will take off in its new home.”

Within six months of him taking the top role, Armstrong had left the company (to be succeeded by Guru Gowrappan); and then Verizon wrote the value of its media assets down to $4.6 billion, noting at the time that Oath “experienced increased competitive and market pressures throughout 2018 that have resulted in lower-than-expected revenues and earnings.”

And the Oath name was short lived, with Verizon adopting a far more straightforward name, Verizon Media, in January 2019.

Further moves happened in increments. In August 2019, the company sold blogging platform Tumblr to WordPress-owner, Automattic, for what was described then as a "nominal" price.

Then late last year, as the media world suffered from lack of ad revenue amid the COVID-19 pandemic, Verizon sold off HuffPost to Buzzfeed, coupled with an equity investment into the digital media company and an advertising and syndication deal. And there have been various layoffs to trim the wider media operation.

Since the HuffPost transaction, the rumors swirling around Verizon's plans to shed its remaining media assets intensified. (Although, again, there were reports around a possible sale for years before this.)

Yet that isn't the full story.

In spite of a rough year for online publishing, Verizon Media began to see a rebound earlier this year, marking a 12% year-over-year jump in revenue for Q1. In this morning's release, the company cites Yahoo News' growth on TikTok, saying that platform "continues to evolve as a key destination for finance and news among Gen Z." It was, at very least, some short-term good news that may have ultimately better positioned the telecom for a big selloff.

Founded in 1990, Apollo has a wide and diverse range of assets, including the recently purchased Venetian resort in Las Vegas and craft giant, Michael’s. It also has a pretty extensive range of holdings in the telecoms, media and tech sector, including ADT, Coinstar, radio and television conglomerate Cox Media, with some assets going private but then getting spun out as public businesses (Rackspace, another Apollo investment, is one example of that). In other words, precisely what shape a company like Verizon Media would ultimately take as part of the Apollo portfolio is still something of a question mark.

“We are big believers in the growth prospects of Yahoo and the macro tailwinds driving growth in digital media, advertising technology and consumer internet platforms,” Apollo senior partner David Sambur says in the release. “Apollo has a long track record of investing in technology and media companies and we look forward to drawing on that experience to help Yahoo continue to thrive.”

The deal is subject to the standard regulator scrutiny. It's expected to close in the second half of the year. LionTree served as lead financial advisor to and will invest alongside the Apollo Funds.