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Author Topic: H&F presses on with $4 billion Getty Images sale  (Read 30925 times)

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red

« on: July 03, 2012, 19:10 »
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http://finance.yahoo.com/news/h-f-presses-4-billion-224345818.html?l=1

Private equity firm Hellman & Friedman LLC is pushing ahead with a $4 billion sale of Getty Images Inc, the largest supplier of stock photos, video and other digital content, to private equity, two people familiar with the matter said on Tuesday.

The business has seen little growth in earnings before interest, tax, depreciation and amortization (EBITDA) since Hellman bought it but has enjoyed increasing demand for its online imagery products and services. This could lead to Getty fetching a higher EBITDA valuation multiple, the sources said.

Representatives of Getty and Hellman did not respond to a request for comment while KKR, TPG and Bain declined to comment.

In March, Hellman and the company's minority shareholders reaped a $379 million dividend from Getty funded with debt and $115 million of cash. This followed a $504 million dividend at the end of 2010.

In credit notes in March, ratings agency Moody's said Getty's latest dividend recapitalization led to a "moderately high" debt-to-EBITDA leverage of 4.4 times compared to 3.5 times pre-dividend. Getty had revenues of about $945 million in 2011.


« Reply #1 on: July 03, 2012, 19:19 »
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^^^ Ha, ha, ha. I did check the date but it doesn't appear to be April 1st. Dream on H&F. Prepare for major haircut.

lisafx

« Reply #2 on: July 03, 2012, 19:35 »
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Ugh.  What a disgrace - the part about the obscene dividends they took, while running the company into many millions of debt. 

Agree with Gostwyck.  They aren't going to get nearly what they are asking.  This stone has been bled dry...

« Reply #3 on: July 03, 2012, 21:33 »
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http://finance.yahoo.com/news/h-f-presses-4-billion-224345818.html?l=1


The business has seen little growth in earnings before interest, tax, depreciation and amortization (EBITDA) since Hellman bought it but has enjoyed increasing demand for its online imagery products and services.


---------------------------------------------------------------

I don't understand.  With all the cost cutting, price raising, and increased demand EBITDA has not improved?  Where is the money going?  Is it all dividends paid to H&F?  Was Kelly really right about it being unsustainable after all ::)

And yes, the mortgage/dividend thing is again obscene.  And the idea that you can sell this for $4 billion...  Somebody call PT Barnum.                                                         

« Reply #4 on: July 03, 2012, 22:52 »
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I find the deeply depressing part of this is the buyers are more private equity firms. So - assuming they somehow get someone to buy them out at close to the high asking price - we are faced with more belt tightening and squeezing suppliers (i.e. us) as the second round of vultures want to collect their "dividends" on this deal.

While the business is in the hands of those who want to drain profits from it versus invest in improving it over the long haul, I can't see how it can be a good thing for anyone but the financial firms advising on the deals and those receiving the "dividends".

« Reply #5 on: July 04, 2012, 00:52 »
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A good reason not to be exclusive anywhere. When businesses are being run as debt engines and not as businesses trying to make profits through customer growth etc it's what you call unsustainable.

RacePhoto

« Reply #6 on: July 04, 2012, 01:12 »
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"KKR & Co LP and TPG Capital LP, are still in the process, which is now in the second round, the sources said."

"KKR showed its appetite for such companies last month, investing $150 million in New-York based image database firm Fotolia."

Anyone else putting this together into something fearful?

If I invested in something I would want my dividends too, or I wouldn't invest in that company again. That's what H&F is all about.

Microbius

« Reply #7 on: July 04, 2012, 02:03 »
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"In March, Hellman and the company's minority shareholders reaped a $379 million dividend from Getty funded with debt and $115 million of cash. This followed a $504 million dividend at the end of 2010."
Highlighted the typo for correction

« Reply #8 on: July 04, 2012, 02:14 »
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If 50% of Fotolia is worth $300m, I can see how Getty could be valued at $4 billion.  Does it matter if the valuation goes down after floatation if they can get it underwritten?  They're experts at doing this, so I wouldn't expect to see them exit with a big loss.  Unfortunately, the new shareholders might not be so lucky.

rubyroo

« Reply #9 on: July 04, 2012, 02:17 »
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@ Microbius:  LOL a 'reaped' typo.

On this:

"In credit notes in March, ratings agency Moody's said Getty's latest dividend recapitalization led to a "moderately high" debt-to-EBITDA leverage of 4.4 times compared to 3.5 times pre-dividend."

I clearly don't understand the world of big finance.  It sounds to me as though they can pay themselves dividends out of nothing... put the company in further debt so they can get their 'jollies' and then just sell that debt to someone else.  Is that right, or am I reading that wrong?

Is debt not considered a bad thing in that world?
« Last Edit: July 04, 2012, 02:31 by rubyroo »

« Reply #10 on: July 04, 2012, 02:36 »
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Quick search on debt-to-EBITDA leads here:

http://www.readyratios.com/reference/debt/debt_ebitda_ratio.html

"Ratios higher than 4 or 5 usually set off alarms because they indicate that a company is likely to face difficulties in handling its debt burden, and thus is less likely to be able to raise additional loans required to grow and expand the business."

« Reply #11 on: July 04, 2012, 02:45 »
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@ Microbius:  LOL a 'reaped' typo.

On this:

"In credit notes in March, ratings agency Moody's said Getty's latest dividend recapitalization led to a "moderately high" debt-to-EBITDA leverage of 4.4 times compared to 3.5 times pre-dividend."

I clearly don't understand the world of big finance.  It sounds to me as though they can pay themselves dividends out of nothing... put the company in further debt so they can get their 'jollies' and then just sell that debt to someone else.  Is that right, or am I reading that wrong?

Is debt not considered a bad thing in that world?


Yep pay big dividends out of debt. They've just got to find a buyer now that thinks they can suck some more blood from the stone.
Big Business however play to some self created rules. One giant pyramid scheme built on debt.
Works fine until your last one left holding the cards and everybody wants to play a different game.

rubyroo

« Reply #12 on: July 04, 2012, 03:05 »
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Thanks ffNixx (wow!  They took a risk there then...) and qwerty.  "The last one holding the cards..." that's a great way to explain it, thank you.  Now I understand the short-termism in their mentalities perfectly.  

I can only hope that some of the agencies will manage to hold on to control and direction of their business.  Private equity makes us all a bunch of nothings.  Just miniscule numbers of past performance on a spreadsheet.  If debt pays the dividends, then there seems no point in us at all. 

ETA:  From their perspective, I mean... if I don't add that it sounds awfully depressing!
« Last Edit: July 04, 2012, 03:07 by rubyroo »

« Reply #13 on: July 04, 2012, 03:35 »
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Another private investor as the new owner? That would be very scary. At least if they went for an IPO they would be forced to have transparency.

What happened to the idea of being debt free, growing the business for the future and getting a real dividend from profits earned? Innovative leadership that creates new markets? It must be hard for the top people at istock/getty.

I wouldnt be surprised if the same people who invested in fotolia would try to et a stake in getty and then try to consolidate the microstock market by merging us all...

Anyway, news like this depresses me, time to get to work and think about something else.

rubyroo

« Reply #14 on: July 04, 2012, 03:51 »
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Anyway, news like this depresses me, time to get to work and think about something else.

Yep.  Control only what's in your control.  Therein lies sanity. 

« Reply #15 on: July 04, 2012, 07:40 »
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Manchester United seem to be going through a similar process.  I hope these strange financial arrangements will be outlawed one day.
http://www.guardian.co.uk/football/2012/jul/04/manchester-united-debt-cayman-islands?newsfeed=true

« Reply #16 on: July 04, 2012, 08:10 »
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Bottom line, I don't want Getty/Istock to fail.  I make too much money there...still.  But I fear Joan and a few others are right when they say that another venture capitalist group = vulture capitalist and we will once again see a pruning of our commissions....something along the same line of what has already happened.  If Getty believes in themselves so much, then buy themselves and go private again.
« Last Edit: July 04, 2012, 14:05 by Mantis »

« Reply #17 on: July 04, 2012, 13:18 »
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Personally I'd love to see Getty and Fotolia crash and burn. I can see why others that still have lots of eggs in those baskets wouldn't be so happy.

There is definitely something wrong with the whole finance business though. Lots of smoke and mirrors and people that think they are the smartest people in the room * the money out and leaving a mess in their wake.

« Reply #18 on: July 04, 2012, 14:02 »
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The gullibility of investors never ceases to amaze me. Take the Facebook fiasco or recent months. Dress it up, put a bit of lipstick on it and ask 4 billion.

« Reply #19 on: July 04, 2012, 14:17 »
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Bottom line, I don't want Getty/Istock to fail.  I make too much money there...still.  But I fear Joan and a few others are right when they say that another venture capitalist group = vulture capitalist and we will once again see a pruning of our commissions....something along the same line of what has already happened.  If Getty believes in themselves so much, then buy themselves and go private again.

I don't want to see Getty and iStock fail either, even though I'm almost done pulling my portfolio from IS.  Why?  Because...where are all those photographers going to go to sell their stock images?  To smaller traditional agencies?  To the micros?  Both?  Either way, we would all of a sudden be faced with a flash flood of competitors looking for new outlets to sell their stock imagery...and then BOOM...our earnings suddenly drop.  Losing Getty and iStock is bad news for all photographers! 

« Reply #20 on: July 04, 2012, 15:16 »
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Bottom line, I don't want Getty/Istock to fail.  I make too much money there...still.  But I fear Joan and a few others are right when they say that another venture capitalist group = vulture capitalist and we will once again see a pruning of our commissions....something along the same line of what has already happened.  If Getty believes in themselves so much, then buy themselves and go private again.

I don't want to see Getty and iStock fail either, even though I'm almost done pulling my portfolio from IS.  Why?  Because...where are all those photographers going to go to sell their stock images?  To smaller traditional agencies?  To the micros?  Both?  Either way, we would all of a sudden be faced with a flash flood of competitors looking for new outlets to sell their stock imagery...and then BOOM...our earnings suddenly drop.  Losing Getty and iStock is bad news for all photographers! 
Completely agree with you.  Great post.

« Reply #21 on: July 04, 2012, 15:26 »
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they will never go away guys, why would they? slowly perhaps? if so buyers need to get pictures from some place else no? more competition but more buyers too

iStock doing 59k downloads per day, they need to be insanely dumb to drop that volume of sales!

During 2011 alone a minimum of 18,615,558+ images (and probably about 21.5 million) were licensed for use.
(http://blog.microstockgroup.com/istockphoto-2012-semi-annual-analysis/)

SNP

  • Canadian Photographer
« Reply #22 on: July 04, 2012, 15:45 »
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While the business is in the hands of those who want to drain profits from it versus invest in improving it over the long haul, I can't see how it can be a good thing for anyone but the financial firms advising on the deals and those receiving the "dividends".

I fear you're right. I'd also like to see Getty owned by a real company again, with a stake in the business and respect for its suppliers, rather than a PE firm all over again. though KKR seems a better run than H&F, it freaks me out that they've invested in Fotolia.

« Reply #23 on: July 04, 2012, 15:56 »
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they will never go away guys, why would they? slowly perhaps? if so buyers need to get pictures from some place else no? more competition but more buyers too

iStock doing 59k downloads per day, they need to be insanely dumb to drop that volume of sales!

During 2011 alone a minimum of 18,615,558+ images (and probably about 21.5 million) were licensed for use.
(http://blog.microstockgroup.com/istockphoto-2012-semi-annual-analysis/)


It's not all that hard to imagine.  The US government had to save General Motors and the auto industry from collapse with a massive government bailout.  Who would have ever thought that an entire industry could collapse from one or two large companies failing?  And who would have ever thought General Motors or Chrysler could fail? 

And we wouldn't necessarily see a parallel increase in buyers.  Many buyers already purchase images from multiple agencies and independent artists, so they wouldn't be new buyers.  Only buyers who purchase exclusively from Getty and iStock would become new buyers. 

« Reply #24 on: July 04, 2012, 17:01 »
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Bottom line, I don't want Getty/Istock to fail.  I make too much money there...still.  But I fear Joan and a few others are right when they say that another venture capitalist group = vulture capitalist and we will once again see a pruning of our commissions....something along the same line of what has already happened.  If Getty believes in themselves so much, then buy themselves and go private again.

I don't want to see Getty and iStock fail either, even though I'm almost done pulling my portfolio from IS.  Why?  Because...where are all those photographers going to go to sell their stock images?  To smaller traditional agencies?  To the micros?  Both?  Either way, we would all of a sudden be faced with a flash flood of competitors looking for new outlets to sell their stock imagery...and then BOOM...our earnings suddenly drop.  Losing Getty and iStock is bad news for all photographers! 
I agree about the extra competition but the other sites would also be flooded with new buyers from Getty/istock, so I don't think it would be such a bad thing.  I don't think it will happen though, it's about as likely as FT raising commissions.


 

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