"Scale matters": Vox, Group Nine CEOs tout new deal

Details: The merger brings together Vox Media's portfolio of over a dozen internet brands and Group Nine's portfolio of five brands to create a digital media behemoth.

• Discovery, Group Nine Media's largest minority investor, will have a seat on the new company's board, a source tells Axios.
• There are roughly 2000 employees between the two companies, Bankoff said.
• The deal, which was announced Monday and first reported by the Wall Street Journal, is an all-stock transaction.
• Vox Media shareholders will own approximately 75% of the company, while Group Nine Media shareholders will own about 25%, sources tell Axios.

"I think that doing a stock deal like this signifies that we can be the acquirer of choice," Lerer told Axios.

• "My willingness and our willingness to do a stock deal speaks to a belief that there is real value in this stock," he said. "I think we should make the case to others that we have a currency that's going to be valuable."

By the numbers: The companies are expected to bring in combined revenues north of $700 million in 2022, per a source familiar with the deal.

• Axios reported earlier this year that Group Nine was expected to being in at least $200 million in revenue this year.

Between the lines: One important aspect of the deal is that there is little overlap between the advertising portfolios of each brand.

• According to one source, roughly half of Group Nine's advertising client list doesn't yet advertise with Vox Media in any material way.
• Both companies make a sizable amount of revenue from licensing content.
• Bankoff noted that between the two firms, the combined company will "cover every modern media platform of consequence," from TikTok to Roku, YouTube, Netflix, podcasts platforms, and beyond.

Catch up quick: Group Nine Media announced that it had formed its own SPAC last year, which could be used as a vehicle to take another company public with it.

• Bankoff, who will be the CEO and chair of the new combined company, said he and Lerer spoke earlier this year about the SPAC, but "we weren't really ready then." Talks reignited about a partnership in August.
• In his note to staff Monday, Bankoff said, "[W]e have no immediate plans to go public, although we’ll always continue to evaluate opportunities that are in the best interest of all of our stakeholders, including our employees."

The big picture: The deal follows an intense period of consolidation in the digital media space. Just last week, BuzzFeed acquired Complex and became the first digital media company in the modern era to go public via a SPAC.

• "There's going to be a small subset of companies that are really going to matter," Lerer said. There will be "a small subset of multi-billion dollar companies ... I feel like this company is absolutely going to be one of them."

What to watch: As more digital media companies combine and grow, investors will be looking to understand how these new types of digital behemoths should be valued.

• In an investor presentation released ahead of its IPO, BuzzFeed said it's aiming to book $521 million in revenue this year, including revenues from HuffPost — which it acquired earlier this year — and Complex.
• Brian Goldberg, CEO of Bustle Digital Group, told CNBC Saturday "4x revenue should be the default," but "it might take six to eight months" to get there.

The bottom line: "Scale matters," Bankoff said. "Scale for scale's sake is not what's important but quality combined with scale, which is what this story is about, is going to be an advantage in the marketplace."

Go deeper: Vox Media to acquire Group Nine Media