WSJ US BusinessVerizon to Sell Yahoo, AOL for $5 Billion to Apollo

May 3, 20210
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The private-equity firm is paying $4.25 billion in cash for a 90% share of the media assets. Verizon VZ 0.66% 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.

Verizon’s Media Efforts

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.

Global 5G adoption is accelerating. The revolutionary cellular technology is spurring even more innovation in prime growth sectors.

“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.

Verizon has been shrinking its media unit, cutting jobs and selling off its Tumblr blogging platform and HuffPost news operation.

Photo: David Paul Morris/Bloomberg News

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.

Write to Miriam Gottfried at Miriam.Gottfried@wsj.com and Drew FitzGerald at andrew.fitzgerald@wsj.com

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