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Buyout of AOL, Yahoo signals PE’s biggest bet on digital media

Apollo Global Management has for years wanted to become a major player in the media world. The firm finally got its wish Monday.

After days of speculation, Apollo has agreed to acquire a 90% stake in Verizon’s portfolio of digital news sites, including Yahoo and AOL, from Verizon for about $5 billion.

The deal marks private equity’s biggest bet yet on the embattled digital media industry, which has struggled to compete with Google and Facebook for a share of the digital advertising market. And it puts Apollo, an investor engulfed in controversy for the past year-plus over co-founder Leon Black’s connections to disgraced financier Jeffrey Epstein, in control of a collection of news sites after spending years betting on legacy media.

“It’s a textbook Apollo deal, They’ve been interested in media space for a while, judging by their past bidding activity. Apollo probably likes the space since many other investors are avoiding it.”

Indeed, Apollo’s history with media companies dates back years. But that history hasn’t always been successful.


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Private equity is dominating the NBA in 2020

Rich guys like to own professional sports teams. Private equity produces a lot of rich guys. So it’s little surprise that buyout billionaires have been snapping up NBA franchises for the past two decades.

In recent years, a few of those franchises have achieved unprecedented success. In fact, private equity tycoons have turned the league’s Eastern Conference into their own personal playground.

During the 2018-2019 season, the four top finishers in the East were all controlled by private equity pros, including the NBA champion Toronto Raptors. As the 2019-2020 season enters this weekend’s All-Star break, those same teams occupy four of the top five spots in the conference.

And all four ownership groups have at least one common factor in how they’ve achieved recent success, a trait that could tie back to their pasts in overseeing portfolio companies: Instead of meddling in every small decision, they’ve developed reputations for hiring the best talent available and getting out of the way.

PE’s basketball jones

The Milwaukee Bucks have been the NBA’s dominant team so far this season, sitting in first place in the East with a sparkling 46-8 record. The Bucks are co-owned by Wes Edens, a co-founder of Fortress Investment, and Marc Lasry, a co-founder of Avenue Capital, who teamed to acquire the franchise in 2014.

At second place in the East sit the defending champion Raptors. The Toronto franchise is owned by a group called Maple Leaf Sports & Entertainment, which is in turn partially owned by Larry Tanenbaum, chairman of Kilmer Capital Partners and the longtime CEO of Kilmer Van Nostrand. Tanenbaum represents the Raptors on the NBA’s Board of Governors (the league now eschews the word “owner”), making him the team’s most powerful dignitary.
The Boston Celtics occupy third place in the East standings. Since 2002, the legendary franchise has been owned by an investor group led by Wyc Grousbeck (formerly a partner at Highland Capital Partners) that also includes Steve Pagliuca, a co-chairman at Bain Capital. Grousbeck is the son of Irv Grousbeck, a professor at Stanford Graduate School of Business.

And fifth place in the East is currently filled by the Philadelphia 76ers, who in 2011 were acquired by a wide-ranging group of investors that includes Josh Harris, a co-founder of Apollo Global Management, and David Blitzer, global head of tactical opportunities at Blackstone. Harris is the team’s principal owner.


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Sports Illustrated becomes latest legacy magazine gobbled up by PE

It’s become a familiar story for the media industry.  A legacy publication struggles because of declining print advertising revenue.  Digital advertising revenue fails to offset the losses.  A private investor emerges to try to save the business.

The latest example came with a twist Tuesday when Authentic Brands Group agreed to buy the intellectual property of Sports Illustrated from media conglomerate Meredith for $110 million. As part of the unique partnership agreement, Meredith will continue to operate SI’s editorial arm for at least the next two years under the same schedule, while maintaining editorial independence under the direction of publisher Danny Lee and editor-in-chief Chris Stone. The iconic sports publication’s future after that is unclear.

In the meantime, ABG will try to drive revenue by using SI’s brands, which include the company’s namesake, Sports Illustrated Kids, Sportsperson of the Year, SI TV and the company’s iconic swimsuit edition. The company also purchased the rights to more than 2 million images from SI’s photography archives, which it reportedly hopes to monetize.

“We are now perfectly positioned, with the support and resources of ABG, to thrive in many other spaces: events and conferences, licensing, gambling and gaming, IP development, especially in video and TV, to name a few, all while continuing to benefit from Meredith’s industry-leading track record in operating media companies,” Stone said in a press release.

Launched in 2010 with a $250 million investment from Leonard Green & Partners, Knight’s Bridge Capital and founder Jamie Salter, ABG specializes in managing retail, entertainment and sports brands. And its list of clientele is fairly diverse, with the brands of Shaquille O’Neal, Muhammad Ali and Marilyn Monroe among its holdings.

But it remains to be seen if ABG can recharge SI, which has struggled along with the rest of the magazine industry to adapt to the digital landscape. Once heralded for employing a range of legendary sports writers such as Frank Deford and Rick Reilly, the company has seen its market share dwindle from a range of digital online competitors, including the The Ringer, Barstool Sports and The Athletic, which was valued at around $200 million in its latest funding round.

Meredith acquired SI in early 2018 as part of its roughly $1.8 billion deal for Time Inc., with Koch Equity Development contributing $650 million to the purchase. In the ensuing 18 months, the business has unloaded the company’s assets in pursuit of paying down $1 billion worth of debt. It sold Time magazine to Salesforce founder Marc Benioff and wife Lynne Benioff for around $190 million and Fortune magazine to Thai entrepreneur Chatchaval Jiaravanon for $150 million. It’s also shopping FanSided, an SI-affiliated blog network that focuses on sports and pop culture, for a reported $30 million, along with ad platform business Viant.

On a broader scale, the shifting media landscape hasn’t kept investors from dabbling in the US publishing industry, though deal count dropped about 5% in 2018, per Pitchbook data. And 2019 is off to a fairly benign start, with just six completed PE-backed acquisitions to date.  The most notable came in January when Penske Media, a New York-based digital media company backed by the Saudi Arabia Public Investment Fund, bought the remaining 49% stake it didn’t already own in Rolling Stone magazine.


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