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Originally published August 15, 2012 at 6:05 PM | Page modified August 16, 2012 at 6:35 AM

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Getty Images' growth attracts buyer Carlyle

A spell of private ownership may have been the right tonic for Seattle-based Getty Images. The photo and video distributor, which was struggling...

Seattle Times business reporter

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A spell of private ownership may have been the right tonic for Seattle-based Getty Images.

The photo and video distributor, which was struggling to adjust to the declining print-media businesses and a tumbling stock price when it was taken private four years ago, now is more digitally focused and is adding 100,000 customers a quarter, co-founder and Chief Executive Jonathan Klein told The Associated Press.

That growth helps explain why The Carlyle Group, one of the world's biggest private-equity firms, agreed Wednesday to take a majority stake in Getty Images, in a $3.3 billion deal that also gives management and the family of founder Mark Getty a bigger share of the company.

The deal is expected to close later this year. Most details, including how much of the purchase price is being financed with debt, were not disclosed.

However, Klein said that Carlyle will own just over half the company, with the rest held mostly by the Getty family and a smaller stake by management, including himself. The Getty family and management together own about a third of the company now, he said.

Getty Images had about $945 million in revenue last year, according to a March credit report by Moody's. That's up from $857.6 million in 2007, the last full year in which the company reported financial results.

Sam Hamadeh, founder and chief executive of PrivCo, a research firm in New York that specializes in privately held companies, said the deal "seems like a win-win for both sides."

"Getty Images is a true gem of a company, by far the leading provider of current and historical-archive images and video content, which should continue to increase in value as digital media allows for more channels for Getty to monetize its content assets," Hamadeh said in an interview.

The price, which represents 3.5 times the company's annual revenue, "is an attractive deal price for Getty, while still representing a positive return for the sellers," he said.

Hellman & Friedman, a San Francisco-based private-equity firm, paid $2.04 billion in cash, or $34 per share, for Getty Images in July 2008, and assumed about $265 million of the company's debt.

Under Hellman's ownership, Getty Images has taken on additional debt to fund both acquisitions and special dividends to its shareholders, according to Moody's.

In March, the company borrowed $350 million to help fund a $455 million dividend; that debt comes due in November 2015. The company also paid out a $504 million special dividend at the end of 2010, Moody's said.

A $100 million revolving loan also is due in 2015, and $1.245 billion in debt is due a year later. Overall, the ratings firm said, Getty Images' debt is "moderately high" at about 4.4 times operating profit.

Last year Getty Images bought PicScout, a copyright-protection startup, for $20 million, PrivCo said, and earlier this year it bought Gallo Images Middle East for an undisclosed amount.

Getty Images employs about 2,000 people, according to Hellman & Friedman. Last year the company moved its headquarters from its longtime home in Fremont to 60,000 square feet of leased space in the Chinatown International District.

"We feel that some of the industry dynamics, which were against us a few years ago, are now more in our favor," he said.

The company also plans to expand further into Asia and Latin America and release several new products including one that automatically updates photos on clients' websites based on certain keywords, he said.

Getty's business is still mostly based on stock photos and other still images; video and music accounted for less than 11 percent of 2011 revenues, Moody's said.

Material from The Associated Press was

used in this story.

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com.

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