Verizon To Sell Media Business To Apollo Management For $5B But Will Retain 10% Stake

Verizon (VZ) will sell Verizon Media, the company’s ad technology and media platform business, to funds managed by affiliates of Apollo Global Management (APO) for a sale price of $5 billion. However, Verizon will continue to retain a 10% stake in the company that will be known as Yahoo after the close of the acquisition.

Verizon Media’s CEO, Guru Gowrappan said, “We are excited to be joining forces with Apollo. 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. This transition will help to accelerate our growth for the long- term success of the company.”

Verizon Media currently has 900 million monthly active users (MAUs) globally and has reported strong growth in revenues over the past two quarters. The business also consists of global digital media brands like Yahoo and AOL.

The sale price of $5 billion will consist of $4.25 billion in cash and $750 million in preferred interests. The transaction is expected to close in the second half of this year. (See Verizon stock analysis on TipRanks)

Following the announcement, Raymond James analyst Frank Louthan assigned a Buy rating to the stock. Louthan said in a note to investors, “With an impressive count of daily users, including a significant and extremely sticky base of email customers (Yahoo! ran all the old AT&T email brands in addition to the AOL emails that still get monthly fees), the PE guys have a good opportunity to mine cash while shifting the business in favor of newer online trends, and we expect a full rebranding is in store.”

“We expect the business to move far away from brands like go90 and Oath as it attempts to take the Jurassic Tech cash cows like email and inertia driven news and sports users to pay for a way into the new digital age of social media,” Louthan added.

Overall, the stock has a Moderate Buy consensus rating based on 5 Buys and 8 Holds. The average analyst price target of $61.30 implies 5.8% upside potential from current levels.

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