On Monday, Verizon Communications Inc. (VZ, Financial) announced an agreement to sell Verizon Media, including Yahoo and AOL, to Apollo Global Management Inc. (APO, Financial) for a total sum of $5 billion.
According to Verizon's press release, the deal will consist of a $4.25 billion cash buyout with $750 million in preferred interests. All assets of Verizon Media, including its brands and businesses, are included in the deal.
Within the details of the deal, Verizon will maintain a 10% stake in the company and will continue to be led by CEO Guru Gowrappan. Once the deal is complete, the company will be known simply as Yahoo.
"We are excited to be joining forces with Apollo," Gowrappan said. "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."
Last year, Verizon sold HuffPost and Tumblr was sold to WordPress in 2019, providing early indications that the company was looking to exit its media holdings. Despite the high levels of excitement indicated in their press release, Verizon is selling the two businesses for much lower than what they acquired them for. AOL and Yahoo were each purchased for $4.4 billion and $4.5 billion respectively.
Comparatively, Apollo (APO, Financial) is set to acquire two legendary names from the early days of the internet. AOL and Yahoo are both household names thanks to their part in connecting people via messaging and email systems alongside helping new users navigate the ocean of information available at their fingertips. As Apollo takes the reigns of Yahoo, they will aggressively pursue growth areas to benefit the nearly 900 million monthly active users.
On May 3, Verizon shares were trading at $58.05 with a market cap of $240.46 billion. According to the GF Value Line, the shares are trading at a fair value ranking.
Apollo shares were trading at $55.28 with a market cap of $12.84 billion. The shares are modestly overvalued according to the GF Value Line.
Top gurus invested in Verizon (VZ, Financial) and Apollo (APO, Financial) include Mario Gabelli (Trades, Portfolio), the Parnassus Endeavor Fund (Trades, Portfolio) and Louis Moore Bacon (Trades, Portfolio).
Disclosure: Author owns no stocks mentioned.
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