December 9, 2023

Trillium Capital is calling for Getty to go private or sell itself to a strategic buyer. Looking at the stock reaction, investors do not expect any possible deals.

Robert Giroux/Getty Images

issued investment firm Trillium Capital an open letter to the Getty Images holding board, saying the stock-photo house was dramatically undervalued, and suggested the company should find a buyer. Getty stock initially soared but has now retreated amid doubts about a possible deal.

Trillium, which said it holds “hundreds of thousands” of Getty Images shares (ticker: GETY) and equivalents, claimed in the letter that Getty “has not acted on clear opportunities to enhance shareholder value.” Trillium CEO Scott Murray said in an interview that he thinks the company is worth at least $12 per share for a strategic buyer. “There’s a lot of inherent value,” he says. “Somebody would want this property.”

Getty stock has declined markedly since going public through a merger with a special-purpose acquisition company in July 2022 at $10 per share, and briefly hit a high of $37.28 a few days after the deal closed. doing business at the level.

The stock initially rose more than 10% on Tuesday morning after the release of the letter, but quickly gave up those gains, and is now about 3.6% lower for the session at $6.26. Getty has a market capitalization of approximately $2.6 billion, as well as net debt of approximately $1.3 billion.

The Trillium letter outlines several potential routes for Getty’s board to take to boost shareholder value — including the sale of the company to a strategic or private-equity buyer. Trillium also notes that the company’s three largest holders—the Getty family, and affiliates of both Koch Industries and investment firm Neuberger Berman—together hold more than 80% of the company’s stock.

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“We believe that Getty’s three large shareholders have the resources to take the company private and should strongly consider it as a viable option,” says Trillium.

Trillium writes, “Getty has achieved some incredible growth in its core business that should attract a strategic or private-equity buyer.”

Asked for comment, a Getty spokeswoman said the company stands ready to talk to investors. “Getty Images and its board remain committed to the long-term success of Getty Images and shareholder value creation and remain open to constructive insights and engagement with investors,” the spokesperson said.

But Murray said he sent letters to all of Getty’s board members two weeks ago and has not received a response from any of them or the company.

In a series of posts on LinkedIn two weeks ago, Trillium CEO Scott Murray telegraphed that he planned to take an active position in Getty shares before issuing the letter, which caused the stock price to jump.

“I am the owner of hundreds of thousands [shares] Getty Images,” he wrote in a post. “The stock has fallen from a high of $38 to about $3.50 per share. Board needs to make strategic sale or take tech private [deal], The stock will trade at or above $10 per share. Another option is share repurchases. If the Board does not act, we will launch an activist campaign… Getty has the largest collection of images and videos. time to roll.

Murray has gone the activist route with Conduent (CNDT), a business-process services company once formerly part of Xerox (XRX). In A more recent LinkedIn postMurray wrote that his investment helped Conduit’s shares more than double.

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Getty Images was founded in 1995 by oil tycoon J.J. Mark Getty, the grandson of Paul Getty, who was once the richest man in the world. Nasdaq listed business in 1996. In 2008, Getty Images was acquired private for $2.4 billion. Equity firm Hellman & Friedman. acquired the business by the Carlyle Group (CG) and the Getty family for $3.3 billion in 2012; The Getty family gained full control of the company in 2018.

When asked about the situation, Wedbush analyst Michael Pachter told Baron’s that he doubts that there is actually much additional value in Getty’s shares.

“It is difficult to determine what a company is ‘worth’ in a private transaction,” Pachter said via email. “They’re slow growth (but growing), and the current share price trades at about 12 times next year’s EBITDA expectations. Private equity rarely pays more than that.”

Pachter said there’s room for more growth as the company expands into new markets and demand for digital images grows, but he doesn’t see much growth in private-equity interest.

He wrote, “I don’t see much fathom to cut expenses other than the toll fee of being a public company, so I doubt Trillium’s open letter accomplishes much.”

In 2022, Getty Images’ revenue was $926.2 million, up 0.8% from the year before. The company had a loss for the year of $77.6 million, which included a non-tax charge of $160.7 million. Adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, was down 1.7% to $303.9 million.

For 2023, the company is forecasting revenue of $936 million to $963 million, up 1% to 4% from the prior year, with adjusted EBITDA of $305 million to $315 million, up 0.4% to 3.6%. Is.

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Write to Eric J. Savitz at [email protected]