Verizon Unloads Media Assets

AOL, Yahoo Sold for $5 Billion

Verizon Communications (VZ) agreed to sell Yahoo and AOL to Apollo Global Management in a roughly $5 billion deal. The sale marks the end of Verizon’s attempt to morph into a media company.

Apollo is paying $4.25 billion in cash for a 90% stake in the two media assets. Verizon will maintain 10% ownership and will get $750 million of additional preferred stock in the new company. Apollo plans to form a company called Yahoo which will operate both businesses. Verizon paid $4.4 billion to acquire AOL in 2015. It purchased Yahoo for $4.5 billion two years later.

Value to Unlock

Apollo believes there is a lot of value to unlock from the digital properties’ 900 million active monthly users. Verizon used its media business to add more mobile subscribers and reduce churn, which meant it did not take advantage of some opportunities which a media or private-equity company may have pursued.

For example, Yahoo operates a popular sports betting platform but it is not licensed to facilitate gambling. Apollo, however, is licensed in more than 200 jurisdictions. The PE firm sees opportunities like this as a way to boost Yahoo’s revenue. “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, Apollo’s Co-Head of Private Equity said in an interview.

Apollo’s Track Record

Apollo was not the only buyer interested in Verizon’s media unit, which posted 10% increases in revenue over the past two quarters. Other suitors wanted certain assets in the media group but not all of it. Apollo has a track record of success boosting growth at internet properties it acquires—including Shutterfly, the online photo company. Verizon is positioning the sale as a way to focus on providing customers with fiber-optic and cellular connections.

The sale of AOL and Yahoo come at a time when digital advertising is poised to pick up as the economy reopens and people spend on travel again. It will be interesting to see how Apollo chooses to operate the two properties at a complex time for the online media industry.

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