(January 21, 2008)-- Getty Images, the world’s biggest supplier of pictures and video to media and advertising companies, has put itself on the auction block and could fetch more than $1.5 billion, people briefed on the situation said Sunday.
The firm hired Goldman Sachs to advise it on a potential sale, these people said. The company has attracted interest from several buyers, mostly private equity firms, including Kohlberg Kravis Roberts, Bain Capital and others.
Final bids are due by the end of the month, but people briefed on the auction cautioned that it was unclear which firms would submit a final bid. A sale is not assured, because the tightening of the high-yield debt markets has cut off private equity firms from the lifeblood of their business, making it harder to finance deals.
Getty, founded in 1995 in Seattle, has grown through a series of acquisitions into a go-to source for visual media, claiming an average service of 3.2 billion images and 4 million unique visitors at its Web site each month. The company’s main selling point is the licensing of high-quality images from professional photographers around the world. Among its main clients are advertising agencies and media companies, including The New York Times. It also offers video footage for use in movies, television and the Internet.
A spokeswoman for the company contacted last week said the company does not comment on “rumors and speculation.” Some of the company’s premium offerings include the distribution of images from the Time Life and National Geographic collections. Early last year, Getty bought its biggest competitor, MediaVast, for $202 million, acquiring the WireImage service in the process. Last year, Getty held takeover talks with the publicly held Jupitermedia Corporation, but the discussions ended quickly without a deal.
Its main rivals, Jupitermedia, and the Corbis Corporation, a private company owned by the Microsoft founder Bill Gates, have also made a number of acquisitions, though they remain far smaller than Getty. The Internet — a medium that Getty pioneered by being the first to license images online — has made it easier for clients to find pictures for less money.
Getty’s shares have declined more than 47 percent in the last year. Its shares fell 10 percent in August, when the company lowered its full-year profit estimate because of competition from low-cost rivals. Last November, it reported a third-quarter profit of $25.7 million, down 31 percent from a year ago.
Last April, Getty also restated its earnings and took a $28 million to $32 million charge after an internal investigation into the backdating of stock options grants to executives.
Started by Jonathan Klein and Mark Getty, a scion of the J. Paul Getty oil fortune, the company began striking deals and acquiring the photo archives of companies like PhotoDisc. Its growth began to skyrocket with later acquisitions like its $183 million purchase of Eastman Kodak’s Image Bank in 1999.
But the rise of digital photography and the Web created a host of competitors that charged as little as a dollar for an image. Recent events — from the assassination of Benazir Bhutto, the former Pakistani prime minister, to the latest foibles of the entertainer Britney Spears — have led to a surging popularity of low-quality but on-the-scene photos, many taken by cellphone cameras.
“Getty Images continues to be a company in transition, adjusting from being the leading player in an oligopolistic market to being one of many players in a highly competitive market,” Barbara Coffey, a research analyst with Kaufman Brothers, wrote in a research note earlier this month.
The company made its biggest effort to harness some of that new sector’s profit by buying iStockphoto.com, a site for cheaper if also lower-quality photos, for $50 million in 2006. It has lowered the price for some of its wares and offers low-resolution versions of its photographs for $49.
Getty has moved to diversify in other ways. Last June, it bought Pump Audio, a music-licensing company that draws on works by unsigned musicians, for $42.5 million. Another acquisition, WireImage, which does picture coverage of entertainment events like parties, has helped bolster revenue from magazine and newspaper sales as well. Still, some analysts worry that other, cheaper rivals could continue undercutting the company’s prices. Last August, Getty announced that it was laying off 100 employees, or about 5 percent of its full-time staff, its second round of cuts in as many years.
Other analysts are more bullish about Getty’s prospects. Ms. Coffey of Kaufman Brothers raised her recommendation of the stock to hold from sell this month after its price fell closer to her target of $24. Getty’s share price has since fallen, closing at $21.94 on Friday.