How Credit Crunch Shaved Off At Least $45 Million Off Jupiterimages' Sale To Getty Images
This story was written by Rafat Ali.
When Jupitermedia (NSDQ: JUPM) sold off its online images business to its larger rival Getty Images for $96 million earlier in October, some people considered it second-time lucky for the company: Jupiter tried to sell its whole business to Getty in early 2007, but it fell apart then. But the latest sale was not without hitches, and in fact the credit crisis that ballooned in Sept-October may have shaved almost $40 million to $45 million off the final deal price, based on the deal proceedings disclosed in JUPM's PREM14A filing late last week. And while the back and forth is hard to summarize, some key points:
-- Back in March 2007, when the first talks were held, Getty discussed buying its images business for about $388 million, but the talks were terminated soon after.
-- A year later, about three of four other bidders besides Getty, and talks started again with all of them and Getty (NYSE: GYI). And in April this year, a bidder came in with "verbal non-binding indication of interest" to acquire the Images business for approximately $185 million, the filing discloses.
-- Merrill Lynch was retained as the banker from Jupitermedia's side, who also approached Getty again after two other parties became interested. Around May, Hellman & Friedman Advisors, the PE firm that was in the process of buying Getty, indicated a deal could be done around the $200 million range.
-- Tons of back and forth among all bidders and JUPM over the next few months. JUPM had a chance to potentially sell the business at around $145 million to Getty if it entered into a 45-days exclusivity period starting early August, but it didn't, and continued talking to others. Some bidders wanted to buy pieces of the images business for between $65million-$90million...some of these deals were also contingent on the bidders getting funding from other PE firms.
-- As the market continues to worsen, the bid price went lower, on Sept 24, Jonathan Klein, CEO of Getty Images, communicated to Meckler that they were reducing the price to $120 million, "based on the state of the credit and acquisition finance markets."
-- On Oct 16th, Getty went as low as $75 million, "citing difficulty in securing borrowed funds under Getty Images' existing credit facility as a result of the deterioration in the state of the credit and acquisition finance markets and general economic environment." Jupiter indicated it would take $107 million if no performance conditions were attached.
-- After back and forth negotiations over the next week, Jupitermedia board approved the sale at $96 million, with $2 million being placed into an escrow account. Jupitermedia retained ownership of its Peoria, Illinois facility-- estimated to be worth approximately $3 million-- and would lease the facility to Getty Images at market rates.
-- Net proceeds from the sale of Jupiterimages of $89.0 million after payment of approximately $5.0 million in estimated transaction costs and $2.0 million escrow.
By Rafat Ali