BuzzFeed, a digital publisher best known for its viral content, on Thursday announced plans to go public through a merger with a special-purpose acquisition company, signaling a shift. business strategy of a media startup.
BuzzFeed said it planned to merge with a publicly listed shell company, 890 Fifth Avenue Partners, in a deal known as SPAC. It will be valued at $1.5 billion, down from a 2016 valuation of $1.7 billion. As part of the proposed transaction, BuzzFeed will raise $438 million, $150 million of which will be debt-financed.
BuzzFeed also announced that it will acquire Complex Networks in the deal for a total of $300 million, with $200 million in cash and the rest in inventory. Known primarily for its pop-culture reach, Complex also hosts events about food, sports, and athletic shoe collections.
Jonah Peretti, founder and chief executive officer of BuzzFeed, announced the merger during a press conference at the company’s Manhattan headquarters. “This is a very exciting day for BuzzFeed and a great day for our employees and partners,” he said.
Once seen as the future of media, BuzzFeed has become something of an outlier in an industry that has recently rewarded subscription-driven publications and newsletter platforms. If investors at 890 Fifth Avenue vote in favor of the transaction, BuzzFeed expects to close trading later this year and the stock will trade under the symbol BZFD.
Adam Rothstein, executive chairman of 890 Fifth Avenue Partners and a venture capitalist known for his investments in Israeli tech startups, will join BuzzFeed’s board. Made up of veterans of the financial and media worlds, the company’s board members include current and former executives at ESPN, NBC, Playboy, Martha Stewart Living Omnimedia, Subversive Capital and the A&E cable network.
It’s unclear if BuzzFeed shareholders, which include media giants like NBCUniversal, venture capitalists and a host of current and former BuzzFeed employees, can cash in as soon as the company listing shares or not. It is not uncommon for shareholders to have to wait for what is known as the cut-off period.
Mr. Peretti’s growth strategy seems to revolve around acquisitions – partly to gain leverage against major distributors like Google and Facebook, but also because BuzzFeed has yet to reach the scale it needs.
In 2018, he was quietly looking for possible mergers with competitors such as Vice Media, Group Nine and Vox Media. In November, Mr. Peretti arranged BuzzFeed’s acquisition of HuffPost, the website he helped found in 2005 with Arianna Huffington and investor Kenneth Lerer.
With the addition of Complex, BuzzFeed expects revenue to grow 24% to $521 million this year with pre-tax profits of about $57 million. Next year, the company estimates revenue of $654 million and pre-tax profit of $117 million.
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However, that may not be enough.
“We will have the opportunity to pursue more acquisitions, and have more interesting companies that we want to pursue,” Mr. Peretti said at a press conference on Thursday.
When asked if he could look to acquire any companies, he replied, “I don’t know, do you have any ideas?”
Born out of a small office in New York’s Chinatown in 2006, when Mr. Peretti was chief technology officer of The Huffington Post, BuzzFeed began as an experiment in creating content to share on the web. He left HuffPost in 2011, after AOL bought it for $315 million and eventually turned his project into an independent media company with the help of $35 million from investors. fourth.
BuzzFeed quickly became one of the fastest growing digital publishers, eventually raising $500 and being hailed as the future of news media. But in recent years, it has missed ambitious revenue targets and some of its investors have been agitated to sell.
After a series of layoffs in 2019, BuzzFeed began diversifying its business, selling branded cookware and beefing up product recommendations, earning commissions on each sale through its affiliates. Affiliate agreements with Amazon and other companies. “Our model has evolved,” Mr. Peretti said in an interview last year.
SPAC deals, once a complicated move by Wall Street, have become more common in the last year. Special-purpose acquisition companies – shell corporations listed on a stock exchange – are often established with the goal of buying a private business and taking it public.
Group Nine, a BuzzFeed rival, took a different route. It created a SPAC of its own in December, with the aim of finding a company to buy back before listing shares.