SPAC Merger Deal Worth $1.5 Billion to Take BuzzFeed Public
BuzzFeed, the digital media company known for tracking viral content, announced in late June that it would be going public through a merger with a special purpose acquisition company, or SPAC. The combined company would be worth around $1.5 billion. The parties expect the deal to close at the end of 2021.
The 15-year-old digital publishing company believes the deal with accelerate its revenue growth. By becoming a public company, BuzzFeed could position itself to acquire other digital media companies. Upon completion of the SPAC merger, BuzzFeed will list on the Nasdaq under the ticker symbol “BZFD”.
About the SPAC
SPACs, also known as blank-check companies, are publicly traded shell vehicles formed with the purpose of acquiring a private company. Although in existence for decades, SPACs gained significant popularity over the past year. Since the beginning of 2021, numerous companies have decided to go public via a SPAC deal. According to SPAC Research, during the first five months of 2021, 330 SPACs had raised nearly $105 billion.
The SPAC that BuzzFeed will be merging with is a SPAC called 890 5th Avenue Partners. The fictional Avengers Mansion in Marvel’s comic books inspired the name. Adam Rothstein founded 890 5th Avenue Partners. Mr. Rothstein is also a sponsor and director of several other SPACs. He has worked in the venture capital industry for a number of years.
After the transaction closes, most of BuzzFeed’s existing management team will stay in place, including Jonah Peretti as Chief Executive Officer and Felicia DellaFortuna as Chief Financial Officer. Adam Rothstein will join BuzzFeed’s board of directors.
Details of the Deal
As part of the SPAC merger, BuzzFeed will be acquiring another digital publisher called Complex Networks for $300 million. Complex Networks caters to young men, with content featuring streetwear, music and pop culture. In addition to the capital it intends to raise from debuting on the public market, BuzzFeed has also secured approximately $150 million in convertible note financing.
Jonah Peretti, BuzzFeed’s founder and CEO, has come a long way since founding BuzzFeed in a small workspace in New York’s Chinatown neighborhood in 2006. The 47-year-old entrepreneur helped found HuffPost alongside Ariana Huffington in 2005. At one point in his career, Peretti had been a schoolteacher in New Orleans.
BuzzFeed Before the SPAC Merger
While BuzzFeed took off in its earlier years, it faced harder times after 2015. Like other digital media platforms, BuzzFeed was plagued by the dominance of Google and Facebook over the digital advertising industry. In 2017, BuzzFeed missed its revenue targets by almost 20%. BuzzFeed had to lay off employees in 2019 and 2020 in order to cut down expenses at the company.
More recently, BuzzFeed has recently branched into new business areas such as e-commerce. The SPAC merger will help these efforts. The digital publisher launched a standalone site called BuzzFeed Shopping platform to ramp up its commerce division. Products for sale on the platform include everything from face masks to branded cookware. The lifestyle products sold on its e-commerce site complement its digital content.
BuzzFeed has also been growing its affiliate commerce division. Affiliate commerce is the practice of generating profit by referring potential customers to websites that sell products that they might be interested in.
BuzzFeed Acquires HuffPost
In November 2020, BuzzFeed agreed to acquire HuffPost from Verizon Media in a stock deal. The sites have complementary audiences and both have faced business challenges in the wake of increasing BigTech dominance. BuzzFeed has become increasingly focused on mergers as one avenue for accelerating growth.
BuzzFeed’s changing busines strategy and expansion of ecommerce and affiliate commerce have boosted the company’s returns. In 2020, BuzzFeed reported $321 million in revenues. The digital media company is projected to generate revenues of $654 million in 2022.
The $1.5 billion deal will enhance BuzzFeed’s scale and ability to compete in the digital advertising space. BuzzFeed has a number of existing revenue sharing deals with Google, Facebook, and other large platforms. Known as the “triopoly”, Google, Facebook, and Amazon collectively accounted for 90% of the U.S. digital advertising market in 2020.
A number of other digital media companies, including Bustle Digital Group, Vox Media, and Vice Media have held discussions about going public via a SPAC. Vice Media has been in the advanced stage talks with a SPAC called 7GC & Co Holdings about a deal to go public. Bustle, a media company that owns site geared toward women such as Elite Daily, has held talks with several SPACs. Several digital media companies may be waiting to see the impact of a SPAC merger on BuzzFeed’s business before jumping into the SPAC arena themselves.
Peretti described BuzzFeed’s announced SPAC deal as “taking the next step in BuzzFeed’s evolution, bringing capital and additional experience to our business.” In 2020, BuzzFeed turned an operating profit for the first time since 2014. The announced merger is another win in BuzzFeed’s turnaround plan and will help it achieve much needed scale.