Getty Images Inc., the leading seller of stock photography and video footage, said Monday it has agreed to a $2.1 billion buyout from the private equity group Hellman & Friedman LLC.
Ten-year-old Getty, whose nearest competitor is privately held Corbis Corp., put itself up for sale in January after taking a beating on Wall Street for two years.
After reaching a high above $94 per share in November 2005, Getty’s shares tumbled 77 percent to $21.80 in Jan. 18 of this year, as higher costs ate away at profits. Four days later, the Seattle-based company said it would consider strategic alternatives to boost shareholder value.
Troy Mastin, an analyst at William Blair & Co., said Getty’s core business of selling more-expensive photographs to newspapers and magazines had declined as those media struggled with the rise of Internet content. Sales to direct mail and brochure customers also cooled.
At the same time, though, Getty’s newer businesses grew faster. The company bought iStockPhoto.com, which sold images for as little as $1 for unlimited use, in 2006. Mastin said customers who once bought the low end of Getty’s core stock photos moved over to buy the even cheaper royalty-free photos.
And Getty’s editorial offerings — news, sports and celebrity photos for the media — grew, as did its video footage business.
While Getty didn’t give a specific reason for its January decision to seek a buyer, Mastin said it was likely because Getty felt Wall Street was paying more attention to the stagnating core business than to its emerging segments.
“Public markets didn’t seem willing to consider (Getty’s businesses) separately,” Mastin said.
Jonathan Klein, Getty’s chief executive officer, said in a statement that “Hellman & Friedman brings specific industry expertise and support for the vision of the company’s management team.”
The private equity group has invested in other rapidly changing digital businesses, including online advertising company Digitas, acquired by Publicis Groupe, and DoubleClick, whose buyout by Google Inc. is pending regulatory approval in Europe.
San Francisco-based Hellman & Friedman offered $34 per share in cash for all of Getty’s shares, a 39 percent premium over Friday’s close. Based on Getty’s 61 million fully diluted shares, the cash offer is worth almost $2.1 billion. The buyer is also assuming about $300 million in debt, pushing the total value of the transaction to $2.4 billion.
Getty’s board has approved the deal, but shareholders still need to sign off. Closing is expected in the second quarter.
The company’s shares jumped $7.43, or 30 percent, to $31.88 in midday trading Monday.