Silver Lake Partners LP and Bain Capital LLC are among the buyout firms vying to acquire Shutterfly Inc, an online photo-sharing services provider with a market value of $2 billion, according to people familiar with the matter.
Silver Lake and Bain have progressed to the second round in the auction for Shutterfly and are considering whether to submit binding offers in the next few weeks, the people said this week.
Shutterfly shares were trading up 2.4 percent at $51.5 on the news in late morning trading on Wednesday.
The price of the possible offers could not be learned but the people said private equity firms may borrow more than seven times Shutterfly's earnings before interest, tax, depreciation and amortization (EBITDA) in a leveraged buyout.
Shutterfly's enterprise value, which includes the company's equity and debt and excludes its cash, is equivalent to 11.5 times its last 12-month EBITDA and 9.4 times its projected EBITDA in the next 12 months, according to Thomson Reuters data.
The sources asked not to be identified because the deliberations were private. They cautioned that any offers made may not meet the price expectations of Shutterfly's board.
Shutterfly, Silver Lake and Bain declined to comment.
The private equity interest in Shutterfly indicates that a leveraged buyout is a realistic option for the company.
Shutterfly hired boutique investment bank Qatalyst Partners LLC to explore strategic alternatives earlier this year amid increasing competition in its market, according to the sources.
The company's shares have changed little in the last 12 months, versus a 20 percent rise in the S&P 500 Index.
Based in Redwood City, California, Shutterfly allows customers to print their photographs into photo books, cards and gifts. It competes with Hewlett-Packard Co's photo service Snapfish.
In the second quarter ended July 30, Shutterfly generated $159.1 million in revenue and posted a loss of 63 cents per share. The company generates the bulk of its profits during the fourth-quarter holiday season.
A private equity deal for Shutterfly would represent the first major U.S. deal in this space for buyout firms since Carlyle Group LP's acquisition of photo agency Getty Images from Hellman & Friedman LLC in October 2012 for $3.3 billion, including debt.
Bloomberg News separately reported Wednesday that Hellman & Friedman was among the private equity firms that submitted offers for Shutterfly. A source familiar with Hellman & Friedman said the firm has looked at Shutterfly but would not confirm whether it was still pursuing the company. A Hellman & Friedman spokeswoman did not immediately respond to a request for comment.
Final bids for Shutterfly are expected in September, some of the sources said.
(Additional reporting by Olivia Oran and Soyoung Kim in New York; Editing by Bernadette Baum)