Tuesday, January 22, 2008 1:57 PM
Getty goes the market
Eric Reguly
About 10 years ago, when I was living in London, I met and wrote about a young man named Mark Getty, the son of John Paul Getty (later Sir John), the billionaire, American-born British philanthropist and art collector, and grandson of John Paul Getty Sr., the oil baron who was one of the richest men in the world at the time of his death in 1976.
Mark impressed me because he wanted to do something with his life, even when his trust funds could have financed a cheerfully idle playboy existence. John Paul Sr. had 16 grandchildren and, of the lot, Mark was the only one at the time with the ambition to build a company and create wealth. His idea was to start a media company, but not of the usual TV or film variety. Instead he and his South African partner, Jonathan Klein, decided to become suppliers of stock photos and images. In 1995, they launched Getty Communications (later Getty Images), and floated the company on the Nasdaq market.
Today Getty Images is the world's biggest image bank,with a web site that claims to have some 3.2-billion images, many of them from famous collections, such as Tony Stone Images, the Hulton Archive and Eastman Kodak's Image Bank, all picked up in an aggressive acquisitions spree. The good news is that Mark and Jonathan realized their dream to build a billion-dollar company that is the leader in its field. The company (which now trades on the New York Stock Exchange) in fact is worth US$1.5-billion. The bad news is that the company was worth more than twice as much a year ago.
Getty Images confirmed today that it is "exploring strategic alternatives to enhance shareholder value" and has hired Goldman Sachs to figure out what the alternatives might be. Reportedly the investment bankers have placed a US$1.5-billion valuation on the business, effectively capping the share price at today's US$25, up US$3 on the news. The usual private equity suspects, among them KKR and Bain Capital, are said to be interested but you can bet they're in no rush to seal a deal. Certainly Mark and his partner could not have picked a worse time to try to unload their creation. The market sell-off, the recession fears and the credit crunch have all conspired against the dynamic duo.
Getty Images has another problem -- competition from a spate of low-cost rivals who also sell digital photos on their websites. Some of them offer low-quality photos, often taken by "citizen journalists" with their cell-phone cameras, for as little as a buck. Investors fear the competition will heat up, hence the share price fall. A profit warning last August and an earnings restatement, thanks to a hefty charge related an investigation into the backdating of stock options grants to executives, helped to propel the shares even lower.
In spite of the share price plunge, you have to admire Mark Getty for getting in the business game when so many of his relatives didn't. The Getty family has had its share of tragedies. His father suffered from depresson. His older brother, John Paul III, was kidnapped in Rome in 1973 and held in the Calabrian mountains. The kidnappers delivered one of his ears by mail to a Rome newspaper. His sister Aileen developed AIDS. Mark showed that not all Gettys are obsessed with privacy and fearful of striking out on their own. He is still in his 40s and has the potential to restore some of the Gettys' old wealth and fame.
