Verizon Communications Inc. (NYSE: VZ) is handing over Yahoo and AOL to a new owner. Verizon has agreed to sell its Verizon Media business to Apollo Global Management Inc. (NYSE: APO) for $5 billion. Verizon’s shares stayed in green territory on Monday.
As per the terms, Verizon will receive $4.25 billion in cash and preferred interests of $750 million. The deal encompasses all the assets, including brands and businesses, of Verizon Media and is slated to close during the latter half of 2021. Verizon will retain a 10% stake in the entity which will be known as Yahoo upon closure of the transaction.
“We are excited to be joining forces with Apollo. The past two quarters of double-digit growth have demonstrated our ability to transform our media ecosystem. With Apollo’s sector expertise and strategic insight, Yahoo will be well positioned to capitalize on market opportunities, media and transaction experience and continue to grow our full stack digital advertising platform. This transition will help to accelerate our growth for the long- term success of the company.” – Guru Gowrappan, CEO, Verizon Media
Verizon Media performance
Verizon Media delivered revenues of $1.9 billion in the first quarter of 2021, which was up around 10.4% versus the same period a year ago, marking the second consecutive quarter of double-digit year-over-year growth for Verizon Media. The growth during the quarter was driven by a 26% growth in advertising and a 13% growth in revenue from owned and operated platforms. Recently Yahoo News became the fastest-growing news organization on TikTok.
Verizon Media’s total revenues for 2020 were $7 billion, down 5.6% compared to the previous year. Its advertising and search revenue took a hit in the first half of 2020 as customers scaled back their campaigns. After a moderation in the third quarter, revenues saw growth in Q4.
Verizon acquired AOL in 2015 for $4.4 billion and Yahoo in 2017 for $4.5 billion. These brands were bundled under a new division called Oath which was later rebranded as Verizon Media Group in 2018.
Verizon stated in its 2020 annual report that it faced increased competitive and market pressures in 2018 that took a toll on revenue and earnings. The company faces tough competition from Google and Facebook (NASDAQ: FB) in digital advertising. Verizon also admitted that the addition of Yahoo and AOL did not generate as many benefits as expected.
Verizon has sold off or shut down several of its media properties in the past two years. These include, HuffPost, Tumblr, Yahoo Groups and Yahoo Answers.
Verizon’s stock has gained 7% in the past three months.
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