Verizon acquired AOL and Yahoo for about $9 billion. Now it’s selling those assets as part of a $5 billion deal

May 3, 2021, 1:54 PM UTC
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If Facebook’s acquisition of Instagram is the deal executives invoke as the most glowing projection of what their own expensive tie-ups could become, then Verizon’s purchases of AOL and Yahoo has turned into fodder for naysayers.

On Monday, Verizon confirmed earlier reports that it will sell its media group—which includes Yahoo and AOL—to private equity giant Apollo Global Management for about $5 billion. Verizon will retain a 10% stake in the business (valuing the unit at about $5.6 billion total).

The valuation represents a significant decrease from what Verizon paid for the duo a few years ago, when both were already considered fading internet stars. Verizon acquired AOL in 2015 for about $4.4 billion and Yahoo in 2017 for about $4.5 billion.

It’s the end of an era for Verizon, which once sought to reach beyond its telecom core and into online advertising. But it struggled against Facebook and Google, and has offloaded media assets such as HuffPost to Buzzfeed in 2020 and blogging site Tumblr to WordPress owner Automattic in 2019. Internally, under Hans Vestberg, who became Verizon CEO in 2018, the attention shifted to 5G.

It remains to be seen how Apollo will steer the media businesses, but the private equity firm is no stranger to playing ball in the media. It inked a $3 billion deal with Cox Media in 2019 and also helped finance the acquisition of newspaper publisher Gannett that same year.

While the business was not a fit for Verizon, it still brought in no small pennies. In the first quarter of the year, the media segment—which also includes holdings such as TechCrunch, Yahoo Sports, and Engadget—grew sales by 10% to $1.9 billion.

AN EIGHT-YEAR COURTSHIP: It was too much. It was too little. Those were the conflicting soundbites from onlookers opining about Okta’s acquisition of security startup Auth0 for $6.5 billion in March. One thing is for certain: The deal has been long in the making. Here’s an amazing anecdote from 2015, when Okta CEO Todd McKinnon politely pulled a “you’re either with us, or against us” while trying to court then-Auth0 CEO Jon Gelsey over a steak dinner.

“The group met at El Gaucho steakhouse in Bellevue, Wash., Auth0’s hometown. Over a meal of bone-in-ribeye, McKinnon renewed his takeover pitch—and this time, he delivered a hard-edged ultimatum: Join us, or prepare to compete head-to-head. ‘I was a little more aggressive,’ McKinnon recalls.

‘I was like, listen, we’re going to go public and we’re talking about a significant part of Okta that I would give up to combine these companies,’ McKinnon says. (He would not say how much of a stake in the business he was prepared to offer.)”

IN CASE YOU MISSED IT: Last week, project management startup Basecamp threw itself into the limelight after its founders released a memo encouraging employees to steer away from political conversation while at work. Tech writer Casey Newton reported, citing sources, that about a third of the company’s 57 employees had accepted buyouts as of Friday to leave. Basecamp last week said it offered employees severance packages worth between three to six months’ pay, depending on their tenure within the company.

Lucinda Shen
Twitter: @shenlucinda

Anne Sraders helped curate today’s Term Sheet.


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