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Getty Images Sells For $3.3bn « Back
Selina Harrison, October 2012
 
In an auction that pit some of the biggest names in private equity against one another, August saw the Carlyle Group announced as the winning bidder for Getty Images, sealing a deal which valued the world’s No.1 stock photo agency at $3.3bn (£2.1bn).

The deal comes on the back of a flurry of activity in the stock photography market. In May, buyout giant Kohlberg Kravis and Roberts (KKR) announced it had paid $300m for a 50 percent stake in Fotolia, a stock photography business focused on the European market. Meanwhile, US-based rival Shutterstock filed papers around the same time to raise $115m in an initial public offering in New York. As part of the Carlyle deal, the Getty family will increase their stake in Getty Images from 30 percent to just under 50 percent.

With the aim of bringing the fragmented stock photography business into the digital age, chairman Mark Getty and chief executive officer Jonathan Klein co-founded Getty in 1995 and were the first to licence photos online. Moving swiftly to fend off doubts about the value of stock pictures, and in a bid to boost its own catalogue of photography, over the years Getty Images has acquired several of its rivals including the UK picture firm Scoopt and online library iStockPhoto. The company has also launched into the music business, selling digital rights. As such, Getty Images now employs around 1900 people and distributes still imagery, video and multimedia products to some 1.3 million media customers in more than 100 countries.

The deal ends US private equity fund Hellman & Friedman’s (H&F) four year partnership with the Getty family, who paid $2.4bn for a majority stake in the company in 2008. According to a recently published Moody’s report, compared with many buyouts at the time that were closed with less than 30 percent equity, H&F completed the deal with equity in excess of 50 percent. With room to borrow extra funds, at the end of 2010 Getty paid its owners a $504m dividend and, in March, H&F and the company’s minority shareholders reaped a $379m dividend from Getty funded with debt and $115m of cash.

Even so, earlier this year H&F hired Goldman Sachs and JPMorgan Chase to look at ways in which it could offload Getty Images. According to reports H&F had originally looked to exit via a trade sale or through an initial public offering. However, early interest from private equity firms, mixed with choppy conditions for a stock market flotation, pushed the company toward a second successive private equity owner. The sale process began in April and, after attracting significant interest from numerous private equity firms, Carlyle outbid rivals such as KKR, TPG Capital and CVC Capital Partners, albeit with a bid lower than the $4bn tag price the firm was expected to attract. Yet the founders of Getty reacted positively to the deal, which is expected to close later this year.

Speaking on 15 August, the day the deal was confirmed, Mr Getty said “In 17 years, we have built a business that has revolutionised the industry, with innovation at its core. I am confident that the partnership between Getty Images and the Carlyle Group will see the company’s success continue.”

Mr Klein added “Getty Images consistently demonstrates growth, leadership and prominence as one of the world’s leading media companies. This partnership with the Carlyle Group reflects and bolsters our ongoing strategy, strong management team and the talent of our dedicated employees. We are delighted to collaborate with Carlyle, with its formidable pedigree and success, and take the business into its next phase of development and growth.”

Traditionally one of the most active dealmakers in the private equity arena, Carlyle has been particularly busy of late. During the second quarter the firm made 82 deals, including agreeing to buy a United Technologies Corp. unit for $3.5bn and acquire asset manager TCW Group Inc. from Société Générale.

Much of this activity has come out of its Carlyle Partners V fund – a $13.7bn pool that was started in 2007. Other investments in the fund include the $900m purchase of BankUnited Inc. and the $2.54bn buyout of management and technology consulting services firm Booz Allen Hamilton Inc. The fund’s investment period runs through to May next year.

Carlyle was advised by Debevoise & Plimpton LLP, while Getty Images was advised by Goldman Sachs Group Inc, JPMorgan Chase & Co., Weil Gotshal & Manges LLP and Simpson Thacher & Bartlett LLP.

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