BuzzFeed confirms its intention to go public via a PSPC deal
BuzzFeed, the digital publisher known for its viral content, on Thursday announced plans to go public through a merger with a specialist acquisition company, signaling a change in business strategy for the formerly media start-up. high flight.
BuzzFeed has announced its intention to merge with a publicly traded shell company, 890 Fifth Avenue Partners, in what is called a PSPC agreement. It will be valued at $ 1.5 billion, down from its 2016 valuation of $ 1.7 billion. As part of the proposed transaction, BuzzFeed will raise $ 438 million, including $ 150 million in debt financing.
BuzzFeed also announced that it will acquire Complex Networks as part of the deal for a total of $ 300 million, with $ 200 million in cash and the remainder in stock. Known primarily for its pop culture coverage, Complex also hosts events on food, sports, and sneaker collecting.
Jonah Peretti, founder and CEO of BuzzFeed, announced the merger at a press conference at the company’s headquarters in Manhattan. “This is a very exciting day for BuzzFeed and a great day for our employees and partners,” he said.
Once considered the future of media, BuzzFeed has become something of an aberration in an industry that has recently rewarded subscription-based newsletter publications and platforms. If investors at 890 Fifth Avenue vote in favor of the deal, BuzzFeed expects to close the deal by the end of the year and the shares will trade under the ticker symbol BZFD.
Adam Rothstein, executive chairman of 890 Fifth Avenue Partners and venture capitalist known for his investments in Israeli tech start-ups, will join BuzzFeed’s board of directors. Made up of financial and media veterans, the Board of Directors includes current and former executives from ESPN, NBC, Playboy, Martha Stewart Living Omnimedia, Subversive Capital and cable network A&E.
BuzzFeed’s institutional shareholders, which include media giants like NBCUniversal and venture capitalists, will be subject to a six-month lock-in period after the deal closes, preventing them from selling shares immediately. But former BuzzFeed employees should be able to cash in any shares they might own as soon as the company goes public. Mr Peretti said in an interview that he would have majority control of the new BuzzFeed once the merger is completed through a special class of shares.
“For me it was important to have the ability to really focus on the long term of the business and to balance all groups and stakeholders and to have control of the founder was one way to achieve that.” , did he declare. Other publicly traded media companies, including the New York Times, have similar deals.
Mr Peretti’s growth strategy appears to be based on business acquisition – partly to gain influence over major distributors like Google and Facebook, but also because BuzzFeed has yet to reach the kind of scale needed. himself.
In 2018, he quietly researched possible mergers with competitors such as Vice Media, Group Nine and Vox Media. In November, Peretti orchestrated BuzzFeed’s acquisition of HuffPost, the site he helped found in 2005 with Arianna Huffington and investor Kenneth Lerer.
Daily business briefing
With the addition of Complex, BuzzFeed waits revenue to grow 24% to $ 521 million this year with pre-tax profit of about $ 57 million. Next year, he estimates revenue will reach $ 654 million and pre-tax profit $ 117 million.
Yet that may not be enough.
“We will have opportunities to pursue more acquisitions, and there are more exciting companies that we want to pursue,” Mr. Peretti said at Thursday’s press conference.
When asked what businesses he might be looking to acquire, he replied, “I don’t know. You have any ideas ?”
Born out of a small office in New York’s Chinatown in 2006, when Mr. Peretti was CTO of the Huffington Post, BuzzFeed began as an experiment in creating content to be shared on the web. He left what is now HuffPost in 2011, after AOL bought it for $ 315 million, and ended up turning his project into a stand-alone media company with the help of $ 35 million from investors.
BuzzFeed quickly became one of the fastest growing digital publishers, ultimately raising $ 500 million, and was hailed as the future of news media. But in recent years, it has missed ambitious revenue targets and some of its investors have been fighting for a sale.
After a series of layoffs in 2019, BuzzFeed began to diversify its business, selling branded cookware and increasing its product recommendation section, earning a commission on every sale through affiliate agreements with Amazon. and other companies. “Our model has evolved,” Mr. Peretti said in an interview last year.
The PSPC deals, once an obscure Wall Street maneuver, have become more common in the past year. Special purpose acquisition companies – publicly traded shell companies – are usually formed with the aim of buying a private company and bringing it to the stock exchange.
BuzzFeed rival Group Nine has taken a different path. She created her own SPAC in December, with the goal of finding a business to acquire before going public.