BuzzFeed confirms plans to go public via SPAC deal

BuzzFeed, the digital publisher known for its viral content, announced its plan to go public on Thursday through a merger with a special-purpose acquisition company, signaling a shift in the business strategy of the once-high-flying media company. start up.

BuzzFeed said it was planning to merge with a publicly traded shell company, 890 Fifth Avenue Partners, in what is known as a SPAC deal. 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, of which $150 million will be debt financing.

BuzzFeed also announced it would acquire Complex Networks in the deal for a total of $300 million, with $200 million in cash and the remainder in stock. Complex is best known for its pop culture coverage and also hosts food, sports and sneaker collecting events.

Jonah Peretti, BuzzFeed’s founder and CEO, 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 our 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 vote in favor of the transaction at 890 Fifth Avenue, BuzzFeed expects to close the deal by the end of the year and the stock will trade under the ticker symbol BZFD.

Adam Rothstein, the executive chairman of 890 Fifth Avenue Partners and a venture capitalist known for investing in Israeli tech start-ups, will join BuzzFeeds’ board of directors. The company’s board members, which are made up of veterans of finance and the media, include current and former executives at ESPN, NBC, Playboy, Martha Stewart Living Omnimedia, Subversive Capital and the A&E cable network.

It’s unclear whether BuzzFeeds’ shareholders, including media giants like NBCUniversal, venture capitalists and a slew of current and former BuzzFeed employees, will be able to cash out once the company goes public. It is not uncommon for shareholders to have to wait in a so-called lock-up period.

Mr. Perettis’ growth strategy seems to depend on acquiring businesses, partly to gain leverage over major distributors such as Google and Facebook, but also because BuzzFeed has not yet reached the necessary scale on its own.

In 2018, he had quietly looked into possible mergers with competitors such as Vice Media, Group Nine and Vox Media. In November, Mr. Peretti announced BuzzFeeds’ acquisition of HuffPost, the site he helped found in 2005 with Arianna Huffington and investor Kenneth Lerer.

With the addition of Complex, BuzzFeed expected Revenue this year will grow 24 percent to $521 million, with pre-tax profits of approximately $57 million. Next year, it estimates revenues at $654 million and pre-tax profits at $117 million.

However, that may not be enough.

We have opportunities to pursue more acquisitions, and there are more exciting companies we want to pursue, Peretti said in Thursday’s press conference.

When asked which companies he would like to acquire, 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 the chief technology officer of The Huffington Post, BuzzFeed began as an experiment in creating content intended to be shared on the web. He left what is now HuffPost in 2011, after AOL bought it for $315 million, eventually turning his project into a standalone media company with the help of $35 million from investors.

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 failed to meet ambitious sales targets and some of its investors have been pushing for a sale.

After a series of layoffs in 2019, BuzzFeed began diversifying its business, selling branded cookware and ramping up its product recommendations section, earning a commission on each sale through affiliate agreements with Amazon and other companies. Our model has evolved, Mr Peretti said in an interview last year.

SPAC deals, once a mysterious Wall Street maneuver, have become increasingly common in the past year. Special Purpose Acquisitions Shell corporations listed on a stock exchange are usually formed for the purpose of buying a private company and making it public.

Group Nine, a BuzzFeed rival, has taken a different path. It created its own SPAC in December with the goal of finding a company to acquire before it goes public.