Verizon to Sell Yahoo, AOL for $5 Billion to Apollo -- 2nd Update
May 03 2021 - 12:20PM
Dow Jones News
By Miriam Gottfried and Drew FitzGerald
Apollo Global Management Inc. agreed to pay about $5 billion to
acquire Yahoo and AOL from Verizon Communications Inc. as the
wireless company exits its ill-fated foray into the media
business.
The private-equity firm is paying $4.25 billion in cash for a
90% share of the media assets. Verizon will keep a 10% stake and
$750 million of additional preferred stock in the new company,
called Yahoo, that will be formed to operate the business.
The Wall Street Journal earlier reported the potential sale of
Verizon's media assets to Apollo. Verizon Media, which mostly
struggled to grow against Alphabet Inc.'s Google and Facebook Inc.,
generated $7 billion in revenue last year.
Apollo's strategy for the business revolves around getting more
revenue from each of its 900 million active monthly users.
Verizon's positioning of the media business as a complement to its
core mobile business -- aimed at helping it add subscribers and
reduce the number of people who quit -- meant it hasn't pursued
some opportunities to maximize the value of each asset, executives
at the private-equity firm said.
For example, Yahoo has been a popular platform for sports
betting, but isn't formally licensed to host gambling. Apollo,
however, is licensed in more than 200 jurisdictions for
gambling.
"This is a typical Apollo deal in that these are very iconic,
industry leading, businesses, but they need a little tender loving
care," David Sambur, the firm's co-head of private-equity, said in
an interview.
Verizon Media's revenue has increased more than 10% over the
past two quarters, helped by rebounding demand from advertisers
looking to tap an online shopping boom during the coronavirus
pandemic. Digital-ad sales are expected to accelerate in the coming
months as consumers start spending more cash on travel and other
activities.
Other suitors previously showed interest in buying off certain
pieces of the media unit, which includes websites such as
TechCrunch and Yahoo Finance, but weren't willing to make an offer
for the whole portfolio, according to a person familiar with the
matter.
For Apollo, buying the entire portfolio means needing to have a
view on how to run each of the diverse properties. The firm
specializes in doing such complex deals and has focused on boosting
growth at other internet companies it owns, including
online-photo-services company Shutterfly Inc.
Verizon Chief Executive Hans Vestberg said in an interview the
company's long-term strategy to provide "network-as-a-service" to
customers over fiber-optic and cellular connections made the media
business a better fit under new owners. He portrayed the sale as an
outcome years in the making.
"We prioritize our investments with the network," Mr. Vestberg
said on Monday. "This conclusion came a pretty long time ago."
Verizon collected some of the web's best-known brands starting
in 2015 with its purchase of AOL, followed by its 2017 acquisition
of Yahoo. AOL's then-chief, Tim Armstrong, called the new business
a super channel for advertisers to reach hundreds of millions of
users. The company at the time touted an active user base of more
than one billion people.
Executives framed the newly named Oath business as an
alternative way for marketers to reach potential customers outside
of a digital ecosystem dominated by Google, Facebook and Amazon.com
Inc. But the stitched-together media group couldn't keep up with
its technology rivals' explosive sales growth, and Verizon in 2018
wrote down about half of the value of the media brands it had
acquired.
In 2018, Verizon named Mr. Vestberg CEO, picking a
telecom-industry veteran with a penchant for sketching out
engineering concepts on whiteboards for its top job. The Swedish
transplant has spent little time discussing media and has more
often touted the cellphone carrier's plan to boost revenue through
the construction of a next-generation wireless network. Verizon has
been shrinking the media unit, cutting jobs and selling off its
Tumblr blogging platform and HuffPost news operation.
Guru Gowrappan, the current head of Verizon Media and a former
Yahoo executive, will continue to run the business after the deal.
The partners expect the transaction to close in the second half of
the year.
The media division, which employs about 10,000 people, started
with 14,000 employees in 2017. Verizon as a whole employed about
132,000 workers at the end of 2020.
Verizon didn't specify how it would use the sale proceeds,
though executives have previously said they would make debt
payments a priority. The cellphone carrier's borrowing swelled this
year after it committed roughly $53 billion to secure
wireless-spectrum licenses auctioned by the Federal Communications
Commission.
Other telecommunications companies are likewise reassessing
their priorities. The Journal has reported that AT&T Inc. last
year began to field bids for much of the digital-ad business
formerly known as Xandr. The unit, which includes operations
acquired from the AppNexus digital-ad exchange for $1.6 billion in
2018, has increased sales but has failed to meet executives'
aggressive targets.
Ben Mullin and Micah Maidenberg contributed to this article
Write to Miriam Gottfried at Miriam.Gottfried@wsj.com and Drew
FitzGerald at andrew.fitzgerald@wsj.com
(END) Dow Jones Newswires
May 03, 2021 12:05 ET (16:05 GMT)
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