Why Verizon sells Yahoo and Aol to the Apollo fund
Apollo acquired Yahoo and other Verizon media assets for $ 5 billion. Verizon will retain a 10% stake in the new company, which will be called Yahoo
Verizon throws in the towel in the digital media industry.
The second largest US telephone operator today announced the sale of Yahoo and other Verizon Communications media assets to US private equity group Apollo Global Management for $ 5 billion.
The group that Verizon will sell to the American fund by the second half of 2021 includes the former internet giants of Aol and Yahoo. Verizon will still retain a 10% stake in the company to be called Yahoo once the transaction is completed.
The US telco thus shifts the focus to its core network activities and the launch of 5G wireless technology.
The sale is the epilogue of an operation that began at the end of 2018 when Verizon announced the devaluation of 4.6 billion dollars of Oath, the name of the media unit born from the merger between the internet companies Aol and Yahoo at the hands of Verizon in 2017. At the time, Verizon had spent about $ 9 billion on assets hoping to compete with Google and Facebook on digital ads.
Here are the details.
VERIZON SELLS YAHOO AND AOL
US broadband and telecom provider Verizon Communications announced the sale of its digital media businesses, which include Yahoo and Aol, to private equity firm Apollo Global Management, as part of the telecom giant's plan to exit its investments in digital media.
DETAILS OF THE OPERATION
Under the terms of the agreement, Verizon will receive $ 4.25 billion in cash, preferred interest of $ 750 million, and will retain a 10% stake in Verizon Media. The transaction includes Verizon Media's businesses, including its brands and businesses. The transaction is subject to the fulfillment of certain closing conditions and is expected to close in the second half of 2021.
Verizon will, however, retain a 10% stake in the company to be called Yahoo once the transaction is completed.
VERIZON ACQUISITIONS
Verizon bought Aol in 2015 and Yahoo in 2017 for more than $ 9 billion, as it targeted the ever-growing online media market. Furthermore, the fact that many people had their accounts on these two websites also attracted the investment from Verizon.
The purchase was intended to offer Verizon a path to mobile, with the goal of using AOL's advertising technology to sell ads on digital content.
The US telco hoped that uniting the two Internet giants under one rebrand would create a leading player in digital content, boasting websites such as Huffington Post, TechCrunch and Tumblr in its portfolios. And so Oath, oath, was meant to reflect “the promises we make to each other, our consumers, our customers and our partners,” Verizon declared at the time.
DIFFICULT TO BEAT GOOGLE AND FACEBOOK
But Google and Facebook have proven to be unrivaled competitors in the digital advertising market.
THE WRITE-DOWN OF OATH IN 2018
So much so that in 2018 Verizon announced a $ 4.6 billion devaluation on its media assets.
Unfortunately, betting on Aol and Yahoo did not prove to be a winning strategy for Verizon. In the advertising sector, there is really no competition with giants like Alphabet (Google's parent company) and Facebook.
LITTLE FRUIT IN THE LAST YEARS
In 2020, Verizon's digital media segment, which includes Yahoo Finance, Yahoo Mail, and news sites like TechCrunch, Engadget , brought in $ 7 billion in revenue, down 5.6% from last year.
This is mainly due to a sharp drop in advertising revenue in the first half of the year due to the Covid-19 pandemic.
FORWARD ALL ABOUT 5G
Verizon has therefore decided to sell the media asset and focus on improving the technology around its mobile business. In March, it agreed to pay nearly $ 53 billion for the wireless radio wave license that will help the company expand its next-generation 5G infrastructure . It also plans to spend $ 10 billion over the next few years to wire more cell towers and upgrade its systems.
THE APOLLO'S STRATEGY
As the New York Times pointed out, it's unclear what Apollo intends to do with Verizon's multimedia business. The US fund has been involved in other media deals. It helped fund the 2019 merger between USA Today's parent company Gannett and local newspaper chain New Media Investment Group, which created the largest US newspaper publisher. And it owns the Cox Media Group TV and radio stations.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/perche-verizon-cede-yahoo-e-aol-al-fondo-apollo/ on Mon, 03 May 2021 12:15:14 +0000.