Vice's Refinery 29 deal could mean a sale is coming, but just who is buying?
One time media high flier Vice is back in the headlines with its reported $400 million deal acquiring Refinery29, the digital media company focused on millennial women. But few in media circles think this is the deal that puts it back on the IPO track. At best, Vice can hope to convince some bigger player to buy it.
Started in 1994 as an alternative-culture magazine in Montreal, founder Shane Smith crossed the border and expanded Vice into a multiplatform media conglomerate with a cable TV channel, branded series on HBO and a dozen websites convincing investors along the way to sign on board and push the company to an eye-popping $5.7 billion valuation. But layoffs, sexual harassment allegations and advertising challenges have taken its toll on the company -- widely seen as having a for sale sign hanging on it.
One company some analysts have targeted as a possible buyer of Vice Media is the newly formed ViacomCBS. Its CEO, Bob Bakish, recently said that he is not going to seek any transaction that would negatively impact the new company’s stock price. “In the near term ViacomCBS won’t do anything substantial,” a person with direct knowledge of Bakish’s thinking told Fox Business' Charles Gasparino on Sept. 5. “To the extent, a good opportunity comes up (Viacom) would take it but (Bakish) will be highly disciplined when it comes to acquisitions.”
Whether or not Vice would qualify as "good opportunity" would depend on the price, but one leading media observer thinks Vice would fit in well with ViacomCBS.
“That would be the most obvious one,” Alan Wolk, co-founder and lead analyst at TVREV. “Viacom has had an incredible turnaround by accentuating the fact that they have an ‘in’ to that 18-to-34-year-old audience. (Vice) would be a good fit for Pluto, which is their fast, free ad-supported streaming TV service, and I could see it under that umbrella or separately. They already own Awesomeness TV, which a YouTube channel that’s aimed very squarely at, let’s say, middle-school girl audience, and then, his would be an older audience, be 20-something, but very squarely in that 18-to-34 demo that Viacom wants.”
Wolk sees other companies being interested, such as “Disney, because they’re also after that youth market; Hulu even, because it’s a little bit more sophisticated – Hulu’s obviously a part of Disney. I could definitely see that being a thought of theirs.”
The question is would Disney look to recoup its investment or has it given up on Vice? In November 2018, Disney wrote down $157 million of its initial 2016 investment of $400 million after reports suggested that Vice was expected to lose $50 million as its revenue fell flat.
Vice is funded by 10 other investors, with 23 Capital and Soros Fund Management the most recent investors, and with this deal, is now valuing itself at about $3.6 billion.
"It was about time for the consolidation of publishers – none of them have really taken off, and that’s really going to be the only way they kind of get ahead"
Digital deals have been on the move of late with Vox’s purchase last week of legacy publication New York Magazine, and Whistle, the sports and entertainment digital media company, bought Vertical Networks, which focuses on Snapchat original shows.
“Consolidation is going to happen in any industry, you have it in every industry, right,” says Wolk. “It was about time for the consolidation of publishers – none of them have really taken off, and that’s really going to be the only way they kind of get ahead. I think those two companies are an interesting mix because they’re very different; it will be interesting to see how they come together. In those situations, it’s really a jump ball because, you know, they could work really well, figure out economies of scale, or just mess it up completely.”
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Vice and Refinery29 have reportedly been in talks since July, when the latter was searching for a partner to combine with amid tightening finances.
While Refinery29 says it will remain a distinct brand within the Vice Media Group portfolio, the potential to expand its videos into Vice’s cable network, Viceland, is one that could bolster the Refinery brand.
This deal has given Vice an expanded reach more female millennials and now, it “will have a workforce that is majority women," the company said in a release. That should help its image after the harrassment allegations.
Refinery29 has raised over $120 million to date. Executives said in May that the company brought in more than $100 million in revenue last year, and at that time, they were looking to raise an additional $20 million. The new investment is in the form of convertible debt, would bring the total amount the firm has raised to $145.4 million since 2010.
This deal with Vice will help the women-centric website grow internationally. Vice says its global footprint accounts for 50 percent of its revenue, and its global audience reach will also go up around 17% with the addition of Refinery29 the company said in release.
Vice Media CEO Nancy Dubuc said the merger is a landmark moment for independent media worldwide and will improve the voices of both publication's young audiences.
"We will not allow a rapidly consolidating media ecosystem to constrict young people's choices or their ability to freely express themselves about the things they care about most," she said in the statement. "At Vice and Refinery29, the megaphone is theirs to use and the platforms are theirs to build with us."
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