Apollo to Acquire Verizon Media for $5 Billion, Rebranding as Yahoo

Verizon Divests Media Assets to Apollo Global Management for $5 Billion

After multiple days of discussions and circulating reports, Verizon has officially announced an agreement to sell its media holdings to Apollo Global Management for a total of $5 billion. The transaction will see Apollo provide Verizon with $4.25 billion in cash, alongside preferred interests amounting to $750 million, while Verizon will retain a 10% ownership stake in the resulting company.

The Future of Yahoo

Upon completion of the deal, the newly formed entity will operate under the name Yahoo. Current CEO Guru Gowrappan will continue to lead the company, with plans focused on expanding opportunities within content creation, commerce, and the sports betting industry.

The division currently encompasses a diverse portfolio of internet brands, publishing ventures – including TechCrunch – and advertising services.

Verizon’s Strategic Shift

According to an internal memo from Hans Vestberg, Verizon’s CEO, a strategic evaluation revealed that the full potential of the media assets had not yet been realized. “Apollo possesses a compelling vision centered on aggressive growth in commerce, content, and betting,” Vestberg stated.

He further emphasized the potential for synergy between Apollo’s portfolio of established brick-and-mortar businesses and Verizon Media’s e-commerce platform, as well as the value of Verizon Media’s adtech, data analytics, and reach.

Statements from Leadership

Gowrappan expressed excitement about the partnership with Apollo, highlighting the division’s recent double-digit growth and its ability to transform its media ecosystem. He believes Apollo’s expertise will position Yahoo to capitalize on market opportunities and further develop its digital advertising platform.

Gowrappan is also set to receive a $3 million retention bonus should he remain with the company for six months following the deal’s closure.

Reed Rayman, a partner at Apollo, conveyed enthusiasm for unlocking the potential of Yahoo and its brands. He acknowledged the progress made by the organization and expressed a commitment to collaborating with the team and Verizon to accelerate Yahoo’s growth.

A Retreat from Content Ownership

While Verizon will maintain a minority stake, the divestment represents a significant shift away from the company’s previous ambition to directly own, develop, and monetize content alongside its network infrastructure.

Years of Speculation Culminate

This announcement concludes a period of extensive speculation regarding the future of Verizon’s media business, spanning days, weeks, months, and even years. The sale price aligns with recent reports estimating the deal’s value between $4 billion and $5 billion.

A Return on Investment Below Expectations

Despite the substantial figure, the price pales in comparison to Verizon’s initial investments: over $9 billion combined for AOL in 2015 and Yahoo in 2017.

The Evolution of Verizon Media

The acquisition of AOL brought media properties like The Huffington Post, TechCrunch, and Engadget under Verizon’s control. Subsequently, the addition of Yahoo included its search portal, various services, and Tumblr, creating a blend of established and emerging internet brands.

Following the acquisitions, the companies were integrated under the “Oath” brand, as part of a broader strategy to compete with digital advertising giants like Google and Facebook, led by former AOL CEO Tim Armstrong.

Challenges and Restructuring

However, the anticipated results did not materialize as quickly as hoped. Hans Vestberg, who became Verizon’s CEO in 2018, inherited a digital media strategy he hadn’t shaped.

Vestberg acknowledged the progress made by Verizon Media over the past two and a half years and emphasized the need for dedicated investment and resources. He expressed confidence that Apollo’s vision would propel Yahoo’s growth.

Within six months of assuming the top role, Armstrong departed, succeeded by Gowrappan. Verizon also wrote down the value of its media assets to $4.6 billion, citing increased competition and market pressures.

Simplification and Further Divestments

The “Oath” name was replaced with “Verizon Media” in January 2019. Further streamlining occurred in August 2019 with the sale of Tumblr to Automattic for a nominal price.

Late in 2020, amid pandemic-related advertising declines, Verizon sold HuffPost to BuzzFeed, accompanied by an equity investment and advertising agreement. Layoffs were also implemented to reduce operational costs.

A Rebound and Strategic Positioning

Despite a challenging year for online publishing, Verizon Media experienced a revenue increase of 12% year-over-year in the first quarter of 2023. Yahoo News’ growth on TikTok was highlighted as a positive development, potentially enhancing Verizon’s position for the sale.

Apollo’s Diverse Portfolio

Founded in 1990, Apollo boasts a diverse portfolio including the Venetian resort in Las Vegas and craft retailer Michael’s. The firm also has significant holdings in the telecommunications, media, and technology sectors, such as ADT, Coinstar, and Cox Media.

The precise future direction of Verizon Media under Apollo’s ownership remains to be seen.

David Sambur, a senior partner at Apollo, expressed confidence in Yahoo’s growth prospects and the favorable market trends driving digital media, advertising technology, and consumer internet platforms.

Final Steps and Regulatory Review

The deal is subject to regulatory approval and is expected to be finalized in the second half of the year. LionTree served as Verizon’s financial advisor and will also invest alongside Apollo.