Refinery29 is in talks to combine with Vice Media. Sources say its finances are so tight it needs to do a deal soon.

Refinery29 is in talks to combine with Vice Media as its financial situation gets increasingly tight, according to a report and sources close to the companies.
A merger could help the two big venture-backed but money-losing digital media companies get to profitability.
Refinery29 has been in a tight financial situation and urgently seeking to find a merger partner, knowledgeable sources said.
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Refinery29 is reportedly in talks to combine with Vice Media as its financial situation gets tighter — and it could leave a third digital media company, Group Nine Media, without a merger partner.

A Wall Street Journal report and sources close to the companies said a deal was in the works. Such deals are complicated and a merger may end up not happening.

There’s been lots of speculation about mergers between venture-funded digital media outlets over the past few months, as several of them have experienced slowing growth with Google and Facebook increasingly dominating digital advertising. Many VC-backed media companies have failed to maintain investors’ growth expectations, leading some to sell, lay off staff, or shut down.

Women-aimed Refinery29 started in 2005 and has raised $125 million from investors including WPP, Turner and Scripps. Refinery29 has been in a tight financial situation and urgently seeking to find a merger partner, according to three people with direct knowledge of the company’s finances.

Sources said variously that at one point this year, the company was on track to either break even or run out of money by the end of the year. Refinery29’s revenue, at $100 million last year, has been growing but slowly, said a knowledgeable source. The company has been diversifying its revenue with live events and licensing its video to streaming platforms.

Reps from both companies wouldn’t comment for this story.

Both companies raised debt this year

Driving a potential merger is that both Refinery29 and Vice Media aren’t profitable yet. Both laid off 10% of their workforce in the past year and both have raised debt this year, Vice Media raising $250 million earlier this year and Refinery29 raising $8 million. Insiders say companies often raise debt as a last resort when they can’t get anyone to give them more capital.

For its part, Vice Media, started in 1994, has reportedly raised $1.4 billion in funding.

Vice Media’s revenue was reportedly flat at about $625 million in 2018 versus 2017, and leadership said in November that the company was on track to be profitable in its next fiscal year. Vice Media has been focusing on adapting its web properties to film, TV production, and branded content.

A merger of the two companies could bring a few benefits, according to insiders familiar with both companies. Refinery29 has a mostly female audience that would complement Vice Media’s male-leaning audience. Refinery29 has live events, a digital media ad business, and ad-friendly editorial content that could complement Vice Media’s agency and video business and edgy editorial content that many advertisers want to steer clear of.

The cynical view is that combining with Refinery29 would give a reputational boost to Vice Media, whose image has been tarnished by #MeToo problems. It’s trying to improve its workplace culture after reports of mistreatment of and hostility to women at the company — but because of that problematic history, a merger also might put off Refinery29 employees.

WPP is a backer of both companies

Another factor is WPP. The ad agency holding company giant is an investor in both media companies, and as such, WPP has insight into each company’s internal workings. When two money-losing companies combine, a logical outcome is to combine in a stock deal where no money changes hands, M&A insiders said. That enables all parties involved to save face because they won’t have to state a valuation for either company and therefore can avoid acknowledging that the companies aren’t worth what they once thought they were, insiders said.

Of course, if the deal goes through, that would mean no deal for another millennial-aimed, VC-backed media company, Group Nine Media. Earlier this year, three sources close to the companies told Business Insider those two companies were in merger talks. Group Nine, which is backed by Discovery Communications, declined to comment.

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