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Video/Media

Verizon Media, home to Yahoo and AOL, sold to Apollo for $5B

Finalizing a general exit from the media business amid a focus on connectivity under CEO Hans Vestberg, Verizon Communications has agreed to sell off Verizon Media, the unit that contains Yahoo and AOL, sites such as TechCrunch and a swath of advertising technologies, to Apollo Global Management for $5 billion.

Verizon will still keep its fingers on the pulse of those businesses, as it will retain a 10% stake in the company, which will be known as Yahoo. Apollo, a private equity firm, is paying $4.25 billion in cash for the majority stake, and providing Verizon with preferred interests in that business for about $750 million. The deal is expected to close in the second half of 2021, and current Verizon Media CEO Guru Gowrappan will run the business.

Verizon said the "corporate carveout" will enable Verizon Media to pursue growth areas and benefit its base of 900 million active users. Verizon Media's financial situation has been improving, including Q1 2021 revenues of $1.9 billion, up 10.4% from the year-ago period.

But the deal, reported to be in the works late last week, effectively ends Verizon's individual pursuit of the advertising and digital media businesses and its shot at taking on giants such as Google and Facebook. Those moves included Verizon's 2015 acquisition of AOL for $4.4 billion followed by a $4.5 billion deal for Yahoo in 2017, which were later placed under the combined (and short-lived) "Oath" brand. The Apollo transaction also comes nearly three years after Verizon shut down Go90, a free, ad-supported video streaming service that focused on mobile devices.

Shedding media biz fits with Verizon's focus

Analysts said the sale was the right move for Verizon, but one that is a long time in coming.

"While this transaction will have a modest impact on Verizon's leverage ratio, we applaud this decision to reduce debt and non-core activities," the analysts at Sanford C. Bernstein explained Monday in a research note. "The combination of the platforms took longer than expected to execute and their video service Go90 was a failure," they added, recalling that Verizon took a $4.6 billion impairment charge on the AOL/Yahoo business in 2018.

Verizon also bagged plans to build its own OTT-TV service following its 2014 acquisiton of Intel Corp.'s OnCue assets, and instead pursued a strategy focused on bundling its own mobile and broadband offerings with an array of third-party streaming services, including YouTube TV, Disney+, Apple TV+ and Discovery+.

"Strategically this is the right thing for Verizon to do; the Media business has no material value to its other businesses," the analysts with New Street Research explained in a research note. They also pointed out that the recent C-band auction has ratcheted up Verizon's debt balance.

They added that the transaction with Apollo will enable Verizon to focus its attention and resources on wireless, representing a "strong strategic contrast with AT&T," which has been investing heavily on its media properties, including the relatively new HBO Max streaming service. However, AT&T has reportedly shopped around Xandr, its advanced advertising unit.

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— Jeff Baumgartner, Senior Editor, Light Reading

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