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The millennial digital media companies Group Nine and Refinery29 are about to merge, according to three people close to the situation.
There has been a lot of speculation about potential mergers between VC-based digital media over the past few months, many of which have seen slower growth, most of the advertising pie digital going to Google and Facebook. Earlier this year, the leaders of the Nine Group and the refinery declared themselves to be acquirers.
A possible merger of the group of nine refineries may not have been done. Many companies would have talked about the merger and any merger would face big hurdles. Investors, including Discovery and Turner, who respectively supported Group Nine and Refinery, and the boards of directors of both companies are expected to agree on the conditions.
It is also difficult to combine companies from different cultures and the participating companies must agree on the value that their respective companies would have for the new entity. One possible scenario is that companies could merge into a stockless cash transaction, it was learned, having experienced the M & A in the media.
Asked for a comment, a spokesman for the Nine Group said: "It is our policy not to respond to rumors."
A spokesman for the refinery said: "As mentioned earlier, we frequently discuss with our industry counterparts the possibility of meeting, but there is no immediate plan to do so at this time."
Read more: Billions of venture capitalists such as Lerer Hippeau and Lightspeed have fueled the rise of digital media and fueled crazy growth expectations – here's why insiders say this approach kills companies
Companies have links with investors
Group Nine and Refinery29 have similar activities of similar size, although Group Nine is larger; both focus on making videos for a millennial audience. The refinery is not yet profitable. Industry observers badume that the group of nine is not profitable, but the company does not say it. Both are linked in the fact that Ben Lerer, CEO of the Group of Nine, is part of the team of Lerer Hippeau, investor in the refinery.
Group Nine Media is the product of a combination of NowThis, The Dodo, Thrillist and Seeker. It was created in 2016 when Discovery Communications invested $ 100 million in the company. It also raised another $ 40 million in 2017. It is valued at $ 500 million, Discovery holding 42% of the company and worth $ 212 million. Discovery has the option of buying the remaining stake in the company but has not exercised it. Thrillist and The Dodo syndicated in 2017 and 2018, respectively. The company has more than 600 employees.
Refinery is a women's lifestyle publishing house, founded in 2005. It raised $ 125 million in 2016, while Turner led the last round with Scripps for $ 500 million. He experienced two sets of layoffs, in 2017 and in the fall of 2018, and had about 360 employees. The editorial board is unionized in January.
Both companies have been trying to diversify their revenues this year. Group Nine focuses on selling the production of its video studio and on e-commerce.
The refinery earns 70% of its revenue from advertising, the rest of events and other sources. The co-founder and co-CEO, Philippe von Borries, said in January that his goal was to achieve profitability by 2020, by developing his live events, his international growth and selling high quality videos to streaming services.
He added that he was looking to acquire businesses in areas such as events and direct sales businesses to consumers. "We have a great opportunity to be a consolidator.There are some interesting companies to gather.I want the company to be relevant and meaningful in 10 years.And one of the ways is to "Acquire, but if there is an amazing business that would allow us to accelerate our vision, of course, it is something we will consider."
Group Chairman and CEO Nine Ben Lerer also said at the time that he was planning to add companies over the next year.
"We have brands that people are crazy about and grow in all kinds of ways, consolidation is not easy to do, it's about people, culture, and strategy." We're really well positioned to participate significantly, "said Lerer.
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Discussions on digital media mergers were sparked after Jonah Peretti, CEO of BuzzFeed, launched the New York Times idea of BuzzFeed, Refinery29, BuzzFeed, Vox Media and Vice Media joining forces to get leverage on Facebook and other distributors.
Earlier this year, the rumors were about a merger between BuzzFeed-Group Nine, as they both have links with Ken Lerer, chairman of the BuzzFeed board, and Ben Lerer's father. Ben Lerer and Peretti are also friends.
The logic of a merger is that venture-capital-financed digital media companies are short of money, that they are not always profitable and that they can no longer afford it. collect, said the media experts. Venture capital has flocked freely to these new millennial-focused digital media, while they could get a cheap distribution on Facebook.
But Facebook has put a stop to free distribution, with most of the digital advertising going to Facebook and Google, and media companies have struggled to diversify away from advertising. The merger would allow newspaper companies to cut redundant staff and make their investments profitable.
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