Digital publisher BuzzFeed this week made redundant 47 staff of HuffPost (which it acquired in February) and also closed its Canada edition. Founder and CEO Jonah Peretti told staffers the layoffs would enable HuffPost to breakeven in 2021 after losing $20m last year. BuzzFeed itself had laid-off some 50 US employees and also pulled back from most of its non-US operations during 2019-20.
Peretti had claimed BuzzFeed would belatedly break through into profitability in 2020 (despite revenue that was at least 25% down on the $320m achieved in 2019).
But the big BuzzFeed news was that the 15-year-old news provider reportedly now plans to merge with 890 5th Avenue Partners, a Special Purpose Acquisition Company (SPAC) whose advisors and executives include former BuzzFeed president Greg Coleman, ex ESPN digital boss John Kosner, and Linda Yaccarino, of NBCUniversal. In its IPO in January, 890 Fifth Avenue raised $287.5m and said it would invest in media and entertainment businesses.
As part of the HuffPost sale, the vendor Verizon acquired a minority stake in BuzzFeed which valued the business at $1.7bn, reportedly the same valuation as when NBCUniversal invested $200m back in 2015. Some observers have questioned whether that could even be matched by BuzzFeed as part of the SPAC deal.
SPACs (sometimes referred to as “blank check companies”) typically secure a stockmarket listing and then acquire private companies, offering them a simpler alternative to a traditional IPO. The process has hugely gained in popularity in the US over the past year.
Group Nine Acquisition Corp (GNAC) – the SPAC created by executives of Group Nine Media which IPOd at $230m in January – this week added CNN president Jeff Zucker and Melinda Mount, vice chair of Technicolor, to its board as it searches for digital companies to buy and merge with. Other GNAC directors include Dick Parsons, former Time Warner chair, and Reddit COO Jen Wong. (The TV industry is awash with speculation about who or what Zucker will join when he retires from CNN at the end of 2021).
Group Nine Media owns TheDodo, NowThis, Thrilllist, Seeker, and PopSugar. Its chairman-CEO Ben Lerer and president Brian Sugar hold the same titles at GNAC.
Group Nine was formed in 2016 with a $100m investment from Discovery, combining startups backed by Lerer Hippeau Ventures with Seeker from Discovery Digital Networks. In 2017, it raised a further $40m from Discovery, Lerer Hippeau and Axel Springer. At the time, Group Nine – not yet profitable – was said to be valued at $600m. In 2019, it raised a further $50m from Discovery and Springer.
Given their common shareholders and investors, it had earlier been assumed that BuzzFeed would join the Group Nine SPAC. But it seems like 890th 5th Avenue is a done deal.
16 March update: The Information reports: “Media firms such as Vice and BuzzFeed are likely to go public by merging with special purpose acquisition companies in the next few months—but unlike SPAC deals in bubbly industries like electric vehicles, the deals are likely to be done at valuations below what the media firms have fetched in the past. Vice Media is in talks with at least two SPACs. One of the offers is at a valuation around $2.5bn, less than half Vice’s peak valuation of $5.7bn from 2017. Meanwhile, BuzzFeed is in talks to go public through a merger with a SPAC called 890 Fifth Avenue Partners at a valuation that would be a little below BuzzFeed’s $1.7bn peak valuation, one of the people familiar with the situation said.” The Information
