Getty Images Holdings, Inc. ( GETY ) and Shutterstock, Inc. ( SSTK ) shares are trading higher premarket on Tuesday after the companies entered a deal to create a visual content company in a merger of equals. The combined company will have an enterprise value of approximately $3.7 billion.

The merger of Getty Images ( GETY ) and Shutterstock ( SSTK ) will create a larger, more diverse content library, expand opportunities for contributors, and strengthen their commitment to inclusive content.

Shutterstock ( SSTK ) shareholders will have three options for consideration at closing. They can elect to receive $28.85 in cash for each share of Shutterstock ( SSTK ) stock they own.

Alternatively, they can choose to receive 13.67 shares of Getty Images ( GETY ) stock for each Shutterstock ( SSTK ) share.

The third option is a mixed consideration of 9.17 shares of Getty Images ( GETY ) common stock plus $9.50 in cash for each share of Shutterstock ( SSTK ) common stock.

These elections will be subject to proration to ensure that the total consideration from Getty Images ( GETY ) consists of $9.50 in cash and 9.17 Getty Images ( GETY ) shares per Shutterstock ( SSTK ) share before the deal closes.

As of the signing date, the total consideration payable by Getty Images ( GETY ) includes $331 million in cash and 319.4 million shares of Getty Images ( GETY ) stock.

The transaction is subject to customary closing conditions, including approval from Getty Images ( GETY ) and Shutterstock ( SSTK ) stockholders, and the extension or refinancing of Getty Images’ existing debt obligations.

At closing, Getty Images ( GETY ) shareholders will own 54.7% and Shutterstock ( SSTK ) shareholders will own 45.3% of the combined company on a fully diluted basis.

Shutterstock’s Board of Directors may continue to declare quarterly cash dividends until the transaction closes.

The deal is expected to generate significant synergies, with run-rate savings of $150 million to $200 million in SG&A and capital expenditure within the first three years post-close.

About two-thirds of these synergies are anticipated to be realized within the first 12 to 24 months.

Upon closing, Getty Images ( GETY ) CEO Craig Peters will become CEO of the combined company.

The combined company will retain the Getty Images ( GETY ) name and trade on the NYSE under the ticker “GETY.”

On a pro forma basis for 2024, the combined company is expected to generate revenue of $1.979 billion – $1.993 billion, with 46% coming from subscription revenue.

The company is projected to have pre-synergy EBITDA of $569 million – $574 million, and pre-synergy adjusted EBITDA less capital expenditures of $461 million – $466 million.

Paul Hennessy, CEO, Shutterstock ( SSTK ) stated, “We expect the merger to produce value for the customers and stockholders of both companies by capitalizing on attractive growth opportunities to drive combined revenues, accelerating product innovation, realizing significant cost synergies and improving cash flow.”

As of  September 30, 2024, Shutterstock’s cash and cash equivalent stood at $131.4 million, while Getty had a cash balance of $114.4 million.

Price Action: GETY shares are up 80.2% at $4.63, while SSTK shares rose 41.4% at $42.50 premarket at the last check Tuesday.

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