Getty Images (GETY, Financial) and Shutterstock (SSTK, Financial) have announced a merger of equals, forming a leading visual content company. Although Bloomberg hinted at this possibility on Friday, the terms seem more favorable than anticipated, causing shares of both companies to surge.
- The new entity will retain the name Getty Images and trade under the GETY ticker. GETY shareholders will hold 54.7% of the combined company, while SSTK shareholders will own 45.3%. SSTK investors can opt for $28.8487 per share in cash, all GETY shares, or a mix of shares and cash. This merger aims to offer a more extensive content library to customers.
- The merger is expected to drive investment in innovative content creation, expanded event coverage, and enhanced capabilities like search, 3D imagery, and generative AI. The companies highlight their complementary portfolios, offering a wide range of visual content products, including still imagery, video, music, and 3D assets.
- The merger is anticipated to strengthen the balance sheet and boost cash flow. Expected annual cost synergies range from $150 to $200 million by year three, with the deal being accretive to earnings and cash flow starting in year two.
- Getty Images has faced criticism for its leveraged balance sheet, contributing to its low share price. Although Shutterstock has some debt, it is less leveraged. The merger should help deleverage the combined balance sheet, positioning the company to accelerate debt repayment and reduce borrowing costs.
Both companies have experienced declining share prices over the past year. With advancements in generative AI and improved camera phones, the demand for licensed visual content is decreasing. While the merger may reduce costs, addressing these larger macro challenges remains uncertain. Additionally, potential anti-trust concerns could arise, though the timing post-election might suggest leniency from the incoming administration.
