Carlyle Group to buy Getty Images for $3.3 billion

NEW YORK Wed Aug 15, 2012 12:24pm EDT

A general view of the lobby outside of the Carlyle Group offices in Washington, May 3, 2012. REUTERS/Jonathan Ernst

A general view of the lobby outside of the Carlyle Group offices in Washington, May 3, 2012.

Credit: Reuters/Jonathan Ernst

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NEW YORK (Reuters) - Private equity firm Carlyle Group LP agreed to take over photo agency Getty Images Inc from Hellman & Friedman LLC in a $3.3 billion deal, betting on growing demand for online images as the media industry shifts away from print.

As websites from companies like Facebook Inc and Groupon Inc commission as many images as magazines and television outlets do, Carlyle sees an opportunity to boost the business further globally and through new products.

"We will harness Carlyle's financial resources and global network to help take Getty Images to the next stage of product innovation and global growth," Carlyle Managing Director Eliot Merrill said on Wednesday.

Carlyle will acquire a stake of just over 50 percent in Getty, the largest supplier of stock photos, video and other digital content, while Getty management owns the rest, increasing its stake from just over 30 percent. The deal values Getty at $3.3 billion, including debt.

Reuters reported Tuesday that Carlyle was near an agreement to purchase Getty and could make an announcement as early as Wednesday, citing two sources.

Mark Getty, the co-founder and chairman, and the Getty family will put nearly all their ownership interests into the deal, and co-founder and Chief Executive Jonathan Klein will also invest equity in the company.

Getty, which competes with Reuters News and the Associated Press in the market for images for editorial use, plans to expand further in Asia and Latin America and build on products such as Thinkstock and Connect, Klein told Reuters.

Getty, which for the first time shot images at the Summer Olympic Games in London in 3-D and 360-degree formats using robotic cameras, is changing private equity hands as the media landscape becomes hyper-competitive.

Founded in 1995 by Mark Getty and Klein, Getty has adapted to a shift in the media industry to online from print, as demand for digital images increases but the prices commanded online are still lower than in print.

But as the resolution on screens of portable and desktop devices becomes ever higher, Getty expects online pricing to improve.

HELLMAN PROFIT 'OUTSTANDING'

The sale comes more than four years after Hellman & Friedman bought a majority stake in Getty in a $2.4 billion deal. Hellman declined to reveal its exact profit on the investment but called it "outstanding," exceeding its expectations.

The leveraged buyout included more than 50 percent equity, compared with less than 30 percent for many of the similar deals in 2007, Moody's Investors Service Inc said in a report last month.

This left the company with room to borrow further. In March, Hellman and the company's minority shareholders reaped a $379 million dividend from Getty funded with debt and $115 million of cash. This followed a $504 million dividend at the end of 2010. In a private equity investment, a firm often takes a distribution, or dividend, via borrowing.

Carlyle Partners V, a $13.7 billion U.S. buyout fund, will provide equity financing for the investment. JPMorgan, Barclays, Credit Suisse, Goldman Sachs and RBC Capital Markets will provide the debt financing. Goldman and JPMorgan also advised Getty on the deal.

The deal underscores the robust appetite for secondary buyouts - sales from one private equity firm to another - as the industry is flush with capital looking to be put to work, and the initial public offering market remains choppy.

Carlyle prevailed over other private equity bidders in the auction for Getty, including CVC Capital Partners Ltd, sources have said.

The deal is expected to close this year, subject to regulatory approval.

Carlyle invested $1 billion in private equity in the second quarter, but since then has announced deals for which it will commit at least $1.6 billion, Carlyle's co-chief executive, William Conway, said on August 8.

Much of Carlyle's prolific dealmaking in recent months has been related to Carlyle Partners V, which the private equity firm is still putting to work. The fund's investment period runs through May 2013, Conway said.

(Reporting by Soyoung Kim, Greg Roumeliotis and Matt Daily in New York, Editing by Jeffrey Benkoe and Maureen Bavdek)

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