Verizon might be looking for a buyer for its Verizon Media business, according to a report in the Wall Street Journal yesterday. The news outlet said the private equity firm Apollo Global Management is part of the sales process, and the potential sale could be priced in the $4 billion to $5 billion range.
Verizon Media assets include Yahoo, AOL and TechCrunch. The Media group unloaded its HuffPost assets to BuzzFeed in November 2020.
Edward Jones analyst Dave Heger said the past year has been difficult for media companies and for the advertising ecosystem, in general, because of Covid. He said those businesses are just now “showing some signs of life,” so now might be a good time for Verizon to shop around its Media unit.
Verizon shelled out about $9 billion in total for AOL and Yahoo. In 2020, the Media unit earned about $7 billion in revenue. Of the potential sales price of $4 billion to $5 billion, Heger said, “That’s less than 1 times revenue, which is not a big premium by any means.” Although Verizon doesn’t disclose profitability of its Media unit, Heger said, “It doesn’t sound like they would be getting top dollar.”
Raymond James analyst Frank Louthan said if Verizon does sell its Media business it would be a “manageable hit.” He noted Verizon's recent streaming strategy with Disney+ and Discovery+ “is proving to be more cost-effective and is likely to be a better strategy longer term.”
During its earnings call in January, Verizon CFO Matt Ellis said that more than two thirds of the company’s Disney+ promo customers had retained the service after the promotional period ended.
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Both analysts noted that Verizon paid $45.5 billion for C-band in the recent FCC spectrum auction, indicating that its wireless network is the top priority.
Heger said Verizon management has de-emphasized the Media business as a strategic priority in recent years. “I think Vestberg is much more a network guy coming from Ericsson,” he said.
Louthan said a potential sale of the Media division “would supplement free cash flow for either re-investment in fiber and 5G initiatives or helping to reduce the leverage back down closer to pre-C-Band levels.”