March 2, 2012, 2:55 PM

Shutterfly bids to buy Kodak’s online photo services business

The $23.8 million price includes a database of more than 75 million Kodak Gallery customers.

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Online photo services e-retailer Shutterfly Inc. may soon acquire the assets of Eastman Kodak Co.’s similar services unit, Kodak Gallery, for $23.8 million. The price, agreed to by Eastman Kodak, is the first of what may be multiple bids for Kodak Gallery. Kodak filed for bankruptcy in January, and the U.S. Bankruptcy Court will have to supervise an auction process if other parties want to make offers. Kodak says it aims to complete the sale by this spring.

Under the terms of the deal Kodak would sell to Shutterfly, No. 66 in Internet Retailer’s Top 500 Guide, the customer database and photo collections of its more than 75 million U.S. and Canadian Kodak Gallery users. Consumers use Kodak Gallery to share and store digital photos, and to order prints and other customized products. Kodak Gallery account holders would be able to opt out of having their information and photos transferred to Shutterfly, Kodak says.

Kodak says the sale of Kodak Gallery will help it focus on its remaining businesses. “This sale is consistent with our objective of focusing Kodak on a core set of businesses in which we can most profitably leverage our technology and brand strengths,” says Pradeep Jotwani, president, consumer business and chief marketing officer. Jotwani said Kodak will concentrate on home printing products and retail photo solutions, such as photo-printing kiosks in retail stores.

Shutterfly declined to elaborate on why it wants to acquire Kodak Gallery. However, an analysis on the bid today from investment advisors Robert W. Baird & Co. Inc. estimates the Kodak Gallery business brings in $50-$70 million in revenue annually. The acquisition would also bring Shutterfly new customers. “We see the deal as not only offering Shutterfly a healthy base of new customers at an attractive acquisition price, but also a group of photo enthusiasts that should adapt well to Shutterfly’s platform and product offering, and present new cross-selling opportunities,” says Baird analyst Colin Sebastian in a research note.

 

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