📰 the most sensible media merger
Vox Media to acquire Group Nine in an all-stock deal.
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The Big Story
*cue Succession theme*
If you haven't watched the season 3 finale of Succession, don't worry, this isn't a spoiler.
But for those who haven't watched the show, here's the plot synopsis: it's a show about the Roy family, dysfunctional owners of global media conglomerate Waystar RoyCo, fighting for control amid uncertainty about the health of the family's patriarch, Logan Roy.
And one of the common themes on the show is how the family tries its best to curve mergers and acquisitions, which interestingly brings us to today's topic: media consolidation.
It has been a year full of high-profile media deals...but it's not over yet.
Digital media firm Vox Media is reportedly planning to acquire Group Nine Media, creating a new company that would become one of the largest digital media publishers in the US.
The merger would allow Vox—whose portfolio includes The Verge, New York Magazine, SB Nation, Vulture and other podcast and studios businesses—access to Group Nine's leading collection of multi-platform media brands such as PopSugar, Thrillist, The Dodo, and NowThis. And as per Comscore, the resulting company would reach a combined audience of 115 million unduplicated visitors every month.
While the financials remain undisclosed, the all-stock deal gives 75% control to Vox and 25% to Group Nine, with Vox Media CEO Jim Bankoff heading the firm. If all goes well, it would also allow Vox to use a SPAC (special-purpose acquisition company) set up by Group Nine earlier this year and go public. The deal's now subject to regulatory approval and is expected to close by early 2022.
Well, not really.
The key rationale behind the deal is scale, revenue, and complementary portfolios. Given the sharply rising digital advertising rates, it's important now more than ever to have a heightened digital presence on all platforms as the more digital properties you own, the better you are at competing with advertising giants such as Google and Facebook. Plus, according to Wall Street Journal, the merger is also estimated to generate over $700 million in revenue and more than $100 million in profit. As for complementary portfolios, we’ve already talked about that.
But for Group Nine, the merger marks an end to tumultuous on-and-off discussions with several digital media firms for years, including Vox rival BuzzFeed—whose recent IPO was quite…meh. *sad emoji*
The popular entertainment giant, known for its listicles and short pop culture quizzes, went public through a SPAC deal with 890 5th Avenue Partners last week but has since fallen 40%, bringing its market to around $808 million. Despite this, Bustle Digital Group CEO Bryan Goldberg expects the company to trade at a 4x revenue multiple (it’s currently at around 2.5x), adding that "it may take six to eight months to get there.” Regardless, Buzzfeed has set itself as an industry bellwether giving other media firms a clearing standing of their market valuations.
Okay, that’s cool and all, but what does it mean for the overall media industry?
Well, the SPAC craze is very much alive and thriving despite all the regulatory scrutiny to slow down its issuance. In October, a total of 57 SPACs began trading—the highest amount since March. One recent example is Digital World Acquisition Corp. (DWAC), a SPAC that intends to take former President Donald Trump's digital media platform public, soared 25% this week, taking its market cap to around $2 billion.
As digital media publishers continue to battle it out for that sweet, ever-growing market share, we'll continue to see more such high-profile media consolidations in the future.
Till then, I’ll leave you with this quote from our beloved patriarch that sums it all up pretty well.
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