By Denny Jacob

Getty Images Holdings and stock-photo rival Shutterstock are merging to form a company worth about $3.7 billion to meet booming demand for licensed images and videos, as artificial intelligence disrupts the business of content creation.

Shareholders of Seattle-based Getty will own about 54.7% of the combined company, which will retain the Getty name, at the closing of the deal. Shutterstock shareholders will own the remaining 45.3%, the companies said Tuesday. They added that together they would be able to offer a more expansive library of visual content for users, as well as a way to synchronize in-house investments in AI tools.

"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," said Getty Chief Executive Craig Peters, who will serve as CEO of the combined company.

Shutterstock holders can opt to receive about $28.85 a share for each share of common stock they own, around 13.6 shares of Getty for each share of Shutterstock they own, or a mixed consideration of 9.17 shares of Getty stock plus $9.50 in cash for each share of Shutterstock they own.

Shares of both companies surged on the news, with Shutterstock advancing 19% to $35.80 and Getty rising 25% to $3.22, on track for its biggest percentage increase in nearly two years. Getty was founded in 1995 by Chairman Mark Getty and has traded publicly since 2021 after a merger with a blank-check firm.

The combined company will have an 11-member board of directors. It will consist of Peters, six directors designated by Getty and four by Shutterstock including its CEO Paul Hennessy. Getty will retain his role as chairman of the combined company.

The rapid emergence of AI into the mainstream has ushered in a new era of visuals. Photos and videos depicting unique renderings that once required high levels of effort are now done in an instant, opening the door to so-called deepfakes and concerns from creators about copyright protections.

Peters said on a call discussing the deal that neither business had yet to see any affect from generative AI, and that certain goods including its custom offerings retain their own value. "We think, when you combine that with AI, there is upside on the AI front, not downside," Peters said.

"Paul [Hennessy] and I firmly believe AI represents significant opportunities," he added. "We've been investing in it and, through the merger, we are better poised to capitalize on them,"

Getty and Shutterstock expect the combination to drive savings of $150 million to $200 million across capital expenditures and selling, general and administrative expenses within the first three years after the deal closes. About two-thirds of this is expected to be delivered within the first 12 to 24 months. The companies also expect the deal to add to earnings and cash flow beginning in the second year.

The merger remains subject to shareholder and regulatory approval, the latter of which executives said they were confident about obtaining.

The combined Getty Images Holdings will continue to trade on the New York Stock Exchange under the ticker GETY.

Write to Denny Jacob at denny.jacob@wsj.com

(END) Dow Jones Newswires

January 07, 2025 14:59 ET (19:59 GMT)

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