Carlyle wins bidding for Getty Images

CARLYLE GROUP has emerged as the winning bidder for Getty Images, the world’s largest distributor of stock photos and videos, in an auction that pit some of the biggest names in private equity against one another.

The final price of $3.3 billion came in well below initial expectations of up to $4 billion, however, and also below revised expectations of $3.6 billion that surfaced in recent weeks.

Carlyle will take a majority interest in the company, while co-founder and chief executive Jonathan Klein will also invest significant equity.

Mark Getty, co-founder and chairman of the company, and the Getty family will roll their ownership stake into the agreement.

Getty is being sold by Hellman Friedman, a San Francisco-based private equity firm. The agreement represents the latest instance of financial sponsors swapping assets with one another rather than selling to strategic buyers or listing their portfolio companies publicly.

Hellman Friedman took Getty private in 2008 for $2.4 billion and swiftly recouped much of its investment in Getty through a pair of special dividends. Getty paid $496 million to its owners in 2010, and recently announced a $379 million dividend for its owners.

This year Hellman Friedman hired Goldman Sachs and JPMorgan to explore a flotation or sale. However, initial interest from private equity firms and the shaky market for public offerings pushed the company towards a second successive private equity owner.

A field that once included Kohlberg Kravis Roberts and TPG was in recent weeks narrowed down to Carlyle and CVC Capital Partners. CVC declined to top Carlyle’s final bid, however, leaving the price short of initial expectations.

Mr Getty and Mr Klein founded Getty in 1996 with aims to bring the fragmented stock photography business into the digital age.

Though valued below its peak last decade, the company has continued to prosper by diversifying into video and music licensing, even as many of its traditional clients, including newspapers and magazines, have suffered.

It also bought Stockbyte from Kerry entrepreneur Jerry Kennelly in 2006 for $135 million.

Eliot Merrill, Carlyle managing director, said: “We look forward to partnering with Mark Getty, Jonathan Klein and the talented Getty Images management team. We will harness Carlyle’s financial resources and global network to help take Getty Images to the next stage of product innovation and global growth.”

When Getty was taken private by Hellman Friedman shareholders got $34 a share in cash, well below the $95 the shares reached in December 2005.

The stock photography industry has been active lately. KKR recently paid $300 million for a 50 per cent stake in Fotolia, a stock photography business focused on the European market. A US rival, Shutterstock, filed papers to raise $115 million in an initial public offering in New York. – Copyright The Financial Times Limited 2012