Shutterstock (SSTK) announced on Tuesday that it would acquire Getty Images (GETY) in a deal worth $3.7 billion. The deal would result in the creation of a visual content giant that would be positioned to meet the needs of “creative, media, and advertising industries through combined investment in content creation, event coverage, and product and technology innovation.”
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The combined company will be named Getty Images Holdings and will trade on the New York Stock Exchange under the ticker symbol “GETY.”
However, according to Reuters, the merger is likely to face antitrust scrutiny given its scale and market implications. Following the news of the merger, shares of SSTK and GETY soared by more than 20% and 40%, respectively, in pre-market trading.
GETY’s CEO Comments on the Deal
Interestingly, the timing of this deal is strategic, as the licensed visual content industry grapples with disruptions from generative AI tools like Midjourney and OpenAI’s DALL-E. These platforms can create images and videos from simple text prompts, potentially reducing the demand for traditional stock photography.
As the CEO of Getty Images, Craig Peters, pointed out, “With the rapid rise in demand for compelling visual content across industries, there has never been a better time for our two businesses to come together.” As a result, through this merger, the combined entity intends to enhance its content offerings, expand event coverage, and develop new technologies.
Financial Terms of the Deal
Under the terms of the agreement, Shutterstock shareholders can choose between three options. The first option will involve SSTK shareholders receiving $28.80 per share in cash, another option of receiving 13.67 shares of GETY in exchange for each SSTK stock, or a combination of 9.17 GETY shares and $9.50 in cash for every Shutterstock share.
Furthermore, following the close of the deal, Getty shareholders will own 54.7% of the combined entity while Shutterstock investors will own the remaining 45.3%.
Additionally, the merger is expected to generate between $150 million and $200 million in annual cost savings within three years and is likely to be accretive to earnings and cash flows starting from the second year onwards.
Is SSTK Stock a Buy?
Analysts remain sidelined about SSTK stock, with a Hold consensus rating based on two Buys, two Holds, and one Sell. Over the past year, SSTK has declined by more than 30%, and the average SSTK price target of $48.25 implies an upside potential of 60.6% from current levels.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
