Vice Media finally acquired Refinery29, and industry insiders are already wondering how the combined business will be stronger
- Confirming months of speculation, Vice Media is acquiring Refinery29 for mostly stock.
- It's part of a consolidation trend in venture-funded digital media that's seen companies close or sell at a fraction of their presumed value.
- The deal is expected to help Vice Media plug holes in its business and throw Refinery29 a lifeline.
- Some observers question how much stronger the new company will really be, though.
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Vice Media is acquiring Refinery29, confirming months of speculation.
The deal is expected to help Vice Media plug holes in its business, specifically giving it a female audience and events business. But it may do little to help the company long-term or the many investors who poured more than $1 billion combined into both companies, people familiar with both businesses said.
Read more: Vice Media shuffles leadership at its agency as another key exec heads for the exit
Neither Vice or Refinery is profitable. The Financial Times pegged the valuation of the combined company at $4 billion, which is down from Vice's last reported valuation of $5.7 billion in 2017.
The deal is part of a consolidation trend in venture-funded digital media that's seen businesses shut down or sell for a fraction of their once presumed values. Just last week, New York magazine sold to Vox Media in a deal that saw Vox's valuation decline to $750 million from $1 billion.
Women-aimed Refinery29 started in 2005 and has raised $133 million from investors including WPP, Turner, and Scripps. It was last valued at $500 million and made around $100 million in revenue last year.
Vice is one of the most heavily VC-funded media companies. Founded in 1994, it's reportedly raised $1.4 billion in funding. But this year it had to raise $250 million in debt. Disney, with 20% of the company, wrote down its stake this year, appearing to be valuing its stake at virtually nothing.
Vice has 11 investors including TPG, Soros Fund Management, 21st Century Fox, and Disney. Refinery has 14 including WPP, Stripes Group, Scripps Networks, and Turner Broadcasting.
Investors have seen their stakes in digital media dwindle
Few details are widely known, but the deal was reported as being mostly stock. That reflects the fact that Vice isn't profitable, which limits a company's ability to raise money for a deal, M&A sources said. People familiar with Refinery29's finances said that without other cash buyers lining up, Refinery would have little choice than to take Vice stock that might not be worth much but lets it keep going as a company.
In a stock deal, all the investors would likely see their stakes stay the same or decline because they now own a smaller part of a bigger company.
Any cash that's part of the deal could benefit those investors that have a preference or be paid to Refinery29 managers as an incentive to stay on with the new company. But the cash is likely to be small compared to the amount of money raised.
"Nobody's getting rich on this deal," said one media operator with M&A experience.
Another part of the fallout is for Vice employees who got company shares or options over the years. Some people who got those benefits have said they believed they would be essentially worthless and impossible to sell.
The proposed deal wouldn't be without some merits. Short term, the idea is that Vice would use Refinery's audience and 29Rooms events business to complement its male-skewing and video-focused business. Vice said its online audience would increase 17 percent with the acquisition.
Vice was eager to add Refinery's female audience and events
Vice's other area of focus is its creative agency, Virtue Worldwide, and the hope is that Refinery's data on female readers can help Virtue pitch clients' business.
"They bring a killer experiential arm and expertise in spaces we weren't tapping," a Vice insider said.
Some think having Refinery in its portfolio can help Vice's image. Vice insiders were told that Refinery would maintain its editorial integrity and autonomy.
But inside Refinery, people are jittery about how the progressive female brand will live at Vice Media, with has been fighting to improve its reputation after #MeToo problems.
There's also the question of whether an acquisition will materially change Vice's business.
Along with its reputational problem, Vice's digital traffic has declined, giving some advertisers pause. Both brands used to be seen as ways for advertisers to reach elusive millennials, but that's lost its appeal as copycat sites have sprung up and advertisers heavy up on performance-driven spending.
Chief executive Nancy Dubuc is betting heavily on winning in the competitive video arena, and some Vice insiders think the Refinery deal is just part one, with Vice Media itself expected to try to sell itself to a bigger company down the road.