The communications tycoon Verizon is going to sell its media unit to the multinational private equity organization Apollo Global Management, Inc. The worth of the deal is 5 billion dollars, i.e., nearly half of the value of $9 billion that Verizon initially paid to acquire AOL and Yahoo.
Verizon will be able to offload properties from AOL and Yahoo's former networking entities in consequence of the transaction. It will keep a 10% share in the venture ($4.25 billion in cash), which is now recognized as Yahoo, and its CEO, Guru Gowrappan, will head the team.
Apollo will take charge of all the online content business of Yahoo and AOL, including TechCrunch, Yahoo Finance, and Engadget. The acquisition has been widely speculated in recent days and is still awaiting final approval. According to Verizon and Apollo, the contract shall end within the last six months of 2021. It will decrease Verizon's problematic experience with media production and advertising when it gets done.
Verizon invested $4.4 billion in 2015 and $4.5 billion in 2017 in the AOL and Yahoo pair. There have been many rumors about Verizon in the last couple of months that it is considering selling its media assets to concentrate on its cellular networks and other internet service companies. BuzzFeed purchased HuffPost from Verizon the previous year. Moreover, Tumblr and Yahoo Answers were either recently sold or pulled down by the company.
Previously, Verizon planned to transform Yahoo and AOL into online media powerhouses capable of challenging Google and Facebook's supremacy of online ads. Verizon merged the Yahoo and AOL franchises into a unified online advertising unit named Oath under previous AOL CEO Tim Armstrong. However, the Oath project never really took off, and Armstrong decided to resign from the company in 2018. Guru Gowrappan was the CEO of Oath, renamed as "Verizon Media Group" in 2018.
Unlike its competitors, Verizon has signaled that it is no longer involved in communications with the sale of the two. In his statement, Verizon's CEO Hans Vestberg said that his firm had to invest a lot of money to boost its mobile market. It paid approximately $53 billion in March to license wireless airwaves to broaden its 5G framework. It also intends to allocate $10 billion over the next five years to improve its infrastructure and wire further cellular networks.
The corporation's gross debt has surpassed $180 billion, with net debt exceeding three times annual pretax income. Yahoo and AOL, on the other hand, continue to bring in a lot of money. In the first 3 months of the new year, Verizon's media division brought in $1.9 billion in revenue, up 10% from the previous year. At their heights, Yahoo had a market cap of over 125 billion dollars, and AOL had a market value above 200 billion dollars.
Apollo sees the acquisition as a chance to grow its digital media investments, including Cox Media Group, Rackspace, and Shutterfly. It also has extensive experience with the challenging process of purchasing enterprises long-winded from more giant corporations, which typically necessitates the separation of intertwined financials, frameworks, and, in certain instances, key executives.
The New-York based organization is anticipating that a greater emphasis on individual businesses, which it claims are neglected inside a vast media empire, would help it grow faster. Adding more subscription options might become one technique. In a discussion, the two Apollo executives said they see a possibility for Yahoo Sports to take a more significant portion of the digital place and fantasy sports industries, i.e., exponentially increasing.
Apollo seems to be constantly purchasing in recent months, announcing agreements to obtain Michaels and the Venetian Resort. Its leadership ranks have also changed, with Leon Black, the company's co-founder, walking down as chairman in March.