Verizon will sell its media arm overseeing brands like AOL and Yahoo to Apollo Global Management in a $5 billion deal expected to close during the second half of this year.
Verizon announced in a Monday release that the company will keep a 10 percent stake in Verizon Media Group, which will be renamed Yahoo once the deal closes, and will still be headed by chief executive Guru Gowrappan. He said the transaction allows Verizon to focus on its long-term growth.
“We are excited to be joining forces with Apollo,” Gowrappan said in the release. “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.”
On Sunday, Verizon board members approved a $3 million retention bonus for Gowrappan if he stays on for at least six months after the sale closes, according to a U.S. Securities and Exchange Commission filing.
The terms of the acquisition, which include Verizon Media’s assets and its advertising technology business, hand $4.25 billion in cash and preferred interests of $750 million to Verizon. Goldman Sachs was Verizon’s lead financial adviser, along with Evercore and legal counsellors Kirkland & Ellis LLP and Freshfields Bruckhaus Deringer LLP. LionTree joins Apollo Funds as an investor and lead financial advisor for the equity firm.
“We are big believers in the growth prospects of Yahoo and the macro tailwinds driving growth in digital media, advertising technology and consumer internet platforms,” David Sambur, Apollo’s partner and co-head of private equity, said in the release. “Apollo has a long track record of investing in technology and media companies and we look forward to drawing on that experience to help Yahoo continue to thrive.”
Verizon has a more than $240 billion market cap, and its stock price hardly reacted to the news Monday morning. Shortly after market open, Verizon shares were trading up 0.4 percent, or about $58 per share. The company recorded nearly $32.9 billion in total revenue for its first quarter ending March 31, a 4 percent gain from a year ago that beat analyst expectations, according to its earnings report.
The company’s sale signals a broader trend in the communications industry of digital pioneers being sold off to an assorted group of buyers. Yahoo and AOL, which serve as umbrellas for sites like TechCrunch, Yahoo Sports and Endgadget, were leaders in shaping the early days of the Internet but have since been surpassed by start-up-turned-giants like Google and Facebook.
Verizon acquired the two online pioneers for nearly double the amount of its media arm sale: First, it bought AOL, the original dial-up online service, for $4.4 billion in 2015, then Yahoo for nearly $4.5 billion in 2017. At the time, Verizon combined the two acquired companies under the umbrella of Oath, Inc., which couples with the company’s Netherlands media arm, in the sale details filed with the SEC.
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