Byron Allen strikes deal to buy controlling stake in BuzzFeed and become CEO

Byron Allen, a media entrepreneur known for aggressively trying to roll up various media assets, on Monday announced a deal to buy a majority stake in BuzzFeed.

Why it matters: The deal gives the 20-year-old digital publisher a much-needed lifeline. Without a buyer, the company likely would've been forced to file for bankruptcy.

• BuzzFeed's stock has been trading under $1 and the company was warned earlier this year it is at risk of being delisted from the Nasdaq for falling below that threshold.
• It received a similar notice in 2023 and subsequently approved a reverse stock split to boost its share price and maintain its listing.
• Its business has been under enormous pressure from expensive debt and shrinking revenue.

Zoom in: Under the deal, Allen will become CEO and chairman of the company. BuzzFeed's founder and longtime CEO Jonah Peretti will move to a new role as president of BuzzFeed AI.

• Allen will complete the purchase through his family office, Allen Family Digital, and not his private media company, Allen Media Group. AMG houses The Weather Channel, several local broadcast stations and other media assets.

State of play: In a statement, Peretti said BuzzFeed is making "significant changes, including cost reductions" ahead of the deal, that — combined with Allen's new role and investment — "will provide liquidity and operational focus to BuzzFeed, Inc."

• Peretti said BuzzFeed is establishing a new independent entity for food-focused social media brand Tasty and BuzzFeed Studios, which produces vertical micro-dramas, digital video and premium films.
• The company didn't offer many details on Peretti's newly created role as president of BuzzFeed AI.

By the numbers: Allen Family Digital will hold 52% of BuzzFeed's outstanding shares after the deal to buy 40 million shares at $3 each, for a total of $120 million.

• A small portion ($20 million) will be funded with cash at close and the rest will be purchased through a promissory note due in five years, accruing interest at 5% annually.

Zoom out: Allen has tried to secure funding to buy much larger assets in recent years, including Paramount Global, BET and Tegna, but has come up short.

• While he is seen as a shrewd operator, the market has often expressed skepticism around his attempt to buy much larger assets.
• Most recently, Allen Media Group struck a deal to pay CBS tens of millions of dollars to fill the late-night slot for Stephen Colbert with its own shows. Colbert's last show is in two weeks.

The big picture: Once considered one of the most powerful digital media companies, BuzzFeed is now a shell of its former self, and is selling for a fraction of what it was once worth.

• Allen's takeover values BuzzFeed at more than three times its closing stock price Monday of 73 cents per share — around a $28 million market cap.
• At its peak, BuzzFeed was valued at $1.7 billion when it raised $200 million from NBCUniversal in 2016.

Reality check: BuzzFeed's business model has been challenged for years, but it started to face serious pressure after it went public via a blank check company in 2021.

• The company took on a lot of debt to finance that deal, which saw it acquire Complex Networks for around $300 million.
• BuzzFeed has since had to sell off several assets — including Complex and its First We Feast franchise — to help pay down its debt. It also shuttered its award-winning news operation, BuzzFeed News.

The bottom line: Over the past few years, digital publishing economics shifted in favor of direct-to-consumer revenue over advertising businesses that were dependent on traffic from social media and search.

• Peretti struggled to pivot the company's business model fast enough to address those changes, and in the interim, lost the confidence of investors.

What's next: The transaction is expected to close by the end of May, BuzzFeed told investors in a statement Monday.