Getty Images is on the auction block, hoping to be sold for more than $1.5 billion. Final bids are due by the end of January, but people briefed on the situation cautioned that it is unclear which firms would submit. Among those companies showing interest are private equity firms Kohlberg Kravis Roberts and Bain Capital.
Once bids are in Getty's board of directors will determine whether to accept the highest bid. The board could decide to reject all bids and continue to operate the company.
The biggest problem facing Getty is that Wall Street is currently in disarray and much of the funding that was in play a few months ago is gone. Those investors left tend to be much more selective in where they will put their money. Getty and the stock photo business may not be considered the best available option.
The price of Getty shares on Friday, Jan. 18 was $21.94, giving the company a current stock value of about $1.3 billion. It also has approximately $350 million in debt. Two years ago, Getty's stock price was in the $90 range and share value has declined more than 47% in just the last year.
One of the things that appeals to investors is that Getty generates about $150 million in cash per year. That would enable new owners to borrow a lot of additional debt. Getty Images currently has about $300 million in cash.
Short-term prospects for Getty's revenue growth are not particularly attractive. Sales in Getty's commercial still photography core business have been steadily declining in the last three quarters and were down 7.8% in Q3 compared to Q1. Getty's Q4 and year-end figures will be announced on Jan. 31 and most industry observers expect there to be a continued decline. With 2008 shaping up to be a recession year, the prospects for near-term improvement are not bright.
If Getty Images is sold, it is expected that operations will continue much the same.
It would seem likely that Klein will remain as CEO for the foreseeable future. In order to grow revenue, the new owners will want experienced management to continue to operate the company. They are likely to offer Klein a very attractive package to stay.
The company will likely go private, or be absorbed by a much larger company. Thus, it will no longer be required to submit detailed financial reports on a quarterly basis. No longer needing to show increased quarterly profits could enable the company to take a long-range view of the industry that might benefit all involved. On the other hand, the information that Getty has been required to report has been of tremendous value to others in the industry, as an aid to understanding industry trends. That information will disappear.