Faced with declines in its core business and relentless hammering of its stock by Wall Street, the Seattle company said Monday it will revert to private ownership.
Private equity firm Hellman & Friedman has offered to buy Getty for $34 a share in cash, for a total $2.1 billion, and it will assume about $300 million in debt.
Getty's board has approved the merger agreement and is advising shareholders to do the same.
Its management team and Fremont headquarters wouldn't change, and no layoffs are expected, said Chief Executive Jonathan Klein, who founded the company in 1995 with Mark Getty, an heir to the J. Paul Getty fortune.
Klein is staying on as CEO and Getty will remain chairman.
"This probably will be a way for them to pursue a reorganization strategy out of the burning spotlight of Wall Street," said Mike Roarke, an analyst at McAdams Wright Ragen.
Getty's stock has dropped sharply as dramatic shifts in the media environment eroded its traditional market and made its shares less attractive to investors.
As the world's largest distributor of pictures and video, Getty's main business is licensing high-quality images from professional photographers around the world to advertising agencies and media companies.
Its performance is linked to the print media, a sector "in a nuclear winter," said Frederick Searby, advertising and information-services analyst at JP Morgan, which holds at least 1 percent of Getty Images' securities.
At the same time, Getty is challenged by new business models such as micropayments, images for sale at a fraction of the usual professional price, and an explosion of content created by a new generation of photographers armed with digital cameras and Internet connections.
Getty has responded by acquiring micropayment sites such as iStockphoto and citizen media companies like Scoopt.
"I think they're in a transitional period where there's huge uncertainty both about the macro environment and with the new models," Searby said.
Getty's board began last fall "to look at the best way to find additional value for shareholders," Klein said in an interview. "This one couldn't be better."
The offer represents a premium of 55 percent over the closing price Jan. 18, the last trading day before Getty announced it was "exploring strategic alternatives." Until then, Getty's shares had dropped 77 percent from their high of $94 in 2005.
The stock closed Monday at $31.67, up $7.22, or 29.5 percent, on news of the sale.
Considering the tight credit market, some analysts thought financing would be difficult to obtain for such a large buy. But San Francisco-based Hellman Friedman said it has commitments from Barclays Capital, GE Commercial Finance and RBS Greenwich Capital.
While Getty probably would have commanded a higher price a year ago, "it's a pretty decent deal," said Searby.
"We believe in the vision and execution capabilities of Jonathan Klein and his team, and share their commitment to the company's stakeholders and customers," Andy Ballard, managing director of Hellman & Friedman, said in a statement.
"We look forward to working with all of Getty Images' employees to realize the full potential of its traditional businesses while furthering the evolution of Getty Images into a global digital media company," Ballard said.
Klein said the deal would enable the company to make further changes and more aggressive investments "without having to worry about quarterly results. I think parts of the business have terrific long-term potential, but the return is not immediate," he said.
Getty will invest to boost its video capabilities, such as adding storage to upload footage faster, and expand its editorial images beyond English-speaking countries, he said.
Even with the infusion of private cash, Getty will still face the same challenges to its business, Klein added. The investors "will bring to us some expertise. They will bring to us some resources. They are not going to change the dynamics of the industry."
Hellman & Friedman has invested in other rapidly changing digital businesses, including online advertising company Digitas, acquired by Publicis Groupe, and DoubleClick, whose buyout by Google is pending regulatory approval in Europe.
Roarke said he expects Getty could experience job cuts in the future.
"When you have involvement of private equity willing to pay this price, everything over the next year is going to come under the microscope," he said. No layoffs "tends to be one of the things said out of the gate, but with an asterisk that things can change."
credits: Kristi Heim - Seattle Times
Information about Hellman & Friedman's other digital investments was reported by The Associated Press.
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