NEW YORK (Reuters) - Getty Images Inc GYI.N said on Monday it had agreed to a takeover bid of $2.1 billion from Hellman & Friedman, putting the struggling photo and video supplier in the hands of a private equity firm.
The deal, which comes about five weeks after Getty said it would look at strategic alternatives, is worth $34 a share for stockholders. That is a premium of 55 percent over Getty’s closing price on January 18, when it announced that it had hired Goldman Sachs as an adviser and could be up for sale.
Getty’s board has approved the takeover, and the deal is expected to close in the second quarter. Including Getty debt to be assumed by the buyer, the deal is worth $2.4 billion.
The move follows 12 months in which Getty’s shares have dropped 50 percent and it has faced a slowdown at its core rights-managed pictures business. The shares were up 29.9 percent to $31.75 in Monday afternoon trade on the New York Stock Exchange.
Getty, based in Seattle, was built through a series of acquisitions of stock photography houses in the 1990s, and began supplying media companies with pictures to use in advertisements and magazines. It also began selling news, sports and entertainment photos and video.
But a shift of advertising to the Internet and the growth of text-only paid-search advertisements led to a decline in volume for Getty’s rights-managed still pictures. Getty also faced competition from discount Web sites offering pictures.
To offset slowing revenue growth, the company cut jobs and consolidated offices. For the fourth quarter, net profit fell 7.8 percent to $28.5 million, or 48 cents per share.
“The overall systemic issues around less print advertising, more online communication, and significant amount of spend on text-based search, which we hate because it does not have pictures, is not going to change because our ownership changes,” Jonathan Klein, co-founder and chief executive officer of Getty Images, said in an interview.
“But in the private environment we may be able to focus a little more on longer term growth,” he said. “We’ll be able to continue to do what we’re doing without having the public glare every three months.”
Getty does, however, offer its buyer a strong cashflow and a growing business for editorial photographs, which provide media outlets with pictures of everything from politicians to athletes and celebrities.
Hellman & Friedman was not immediately available for comment.
The deal comes amid a broader slowdown in mergers and acquisitions because of troubles in the credit markets. But while the credit crunch has sidelined the mega-deals that defined much of the buyout boom that peaked last year, private equity firms have recently produced more modest transactions.
Last week private equity firm First Reserve said it was buying CHC Helicopter Corp FLYa.TOFLI.N, which provides services to the offshore oil and gas industry, for C$3.7 billion, including assumed debt. First Reserve says it is the largest-ever buyout in the oilfield services industry.
As for the Getty deal, financing commitments have been provided by Barclays Capital, GE Commercial Finance and RBS Greenwich Capital.
Klein said the board had at least one other bid to consider, but picked Hellman & Friedman since the price carried a strong premium and the deal did not hinge on financing conditions. He would not identify other bidders.
While shareholders still must vote on the takeover, Getty Investments and others, including co-founder Mark Getty, who together own 15 percent of the company, have agreed to the deal. Mark Getty is the grandson of J. Paul Getty, founder of Getty Oil.
Additional reporting by Sinead Carew and Jonathan Keehner; editing by Dave Zimmerman and John Wallace
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