Breaking news: Getty backs off the Rex Features deal..
See Getty’s internal email:
From: Nick Evans-Lombe, Chief Operating Officer and Adrian Murrell, SVP Global Editorial
As you know, in April we announced our intention to purchase Rex Features. We decided to voluntarily go to the Office of Fair Trading in the UK for them to review this acquisition, and today they have released their findings. Their decision is that the deal should be referred to the Competition Commission and, as such, we shall not be pursuing this acquisition any further.
Below you can find the statement we are giving reactively, to this news:
We are disappointed that our proposed acquisition of Rex Features has been referred to the Competition Commission and we respectfully disagree with the preliminary concerns expressed by the Office of Fair Trading. Given the distraction that this next phase could potentially bring to both Getty Images and Rex Features, and the parties’ desire to focus their business resources on the production and delivery of high quality services to their customers, we have decided not to pursue this acquisition any further. We still believe Rex Features to be a strong and valuable business and we wish the Rex Features team the very best in the future.
Also attached is an FAQ document outlining some potential Q&As that may be helpful, particularly to sales, who may get asked about this decision/news. This document is confidential and is not for external distribution.
Any further questions, please do not hesitate to contact Adrian or myself. Should you or your team receive any questions from media, please refer them immediately to Alison Crombie.
Nick Evans-Lombe & Adrian Murrell
—————————— This was written prior to the email above —————————————————
Apparently the swallowing of Rex features by Getty Images is not going so smoothly. The Office of Fair Trading in the UK has issued a press release ( see Below) stating that it will review its position on the acquisition and decide if it can move forward. The verdict will come at the end of this year, in December.
This is not good news, either for Getty or Rex Features. Rex finds itself as a sitting duck, unable to invest or retreat as it has to wait in position for the final verdict. In an economy that shifts brutally, that is not a good position to be in. The longer this drags, the longer it gives suppliers, which Rex highly depends on, to move somewhere else, as the future of Rex is uncertain.
For Getty, this is the first time that they are seriously starting to feel the Monopoly barrier. It is expected, that after purchasing so many of its competitor, that Getty, one day, will be denied any new acquisition by government eager to protect a fair market. Maybe this will be the first time. And if it is, this will certainly be a precedent for all other countries investigating Getty for monopolistic attributes.
Finally, for both, this will certainly mean a huge distraction, full of lawyers, filings, paperwork and money being spend in trying to convince the Office .
What is particularly interesting is that customers are complaining about the merger more than other competitor. Getty’s dream of becoming the absolute one stop shop of photography in order to better serve image buyers might also be hitting a brick wall of discontent. Well it is certainly helpful to find all of your images needs in one location, the fear of monopolistic pressure in price, and offering, is becoming stronger .
This is certainly not good news either for Hellman & Friedman, the private equity firm that purchased Getty images for $2Billion a few years . ago. As they always do, they had purchased Getty in order to sale it later. If the company becomes branded as a pre monopolistic business than no one will want to even want to remotely approach it.
OFT refers Getty/Rex merger to the Competition Commission
The OFT today referred the anticipated acquisition by Getty Images, Inc. of Rex Features Limited to the Competition Commission for further investigation.
Getty and Rex are two of the largest suppliers of photographic images for editorial use by publications in the UK. Getty has significant strength in the supply of both archive and current entertainment-related editorial images. The OFT is concerned that, if the merger is allowed to go ahead, the loss of Rex as an independent competitor could enable Getty to increase prices for customers.
During its investigation, the OFT heard a significant number of concerns from third parties, which supported the view that the profiles and extensive image archives of Getty and Rex mean they are close competitors.
The OFT considered carefully whether there would be sufficient constraint on Getty from existing agencies and/or new entrants into the market. However, the evidence available on this was inconclusive, and therefore there remains a realistic prospect of a substantial lessening of competition.
Amelia Fletcher, OFT Senior Director of Mergers, said:
‘This merger would bring together two of the largest and closest competitors for the supply of archive and entertainment images within the UK. A number of publishers, the key customers in this market, are concerned about the potential impact of the acquisition.
‘Some of the information available to the OFT in this case was patchy and inconsistent. We have not been able to rule out competition concerns on the basis of this evidence, and so the right course of action is to refer the merger for a fuller investigation by the Competition Commission.’
The Competition Commission is expected to report by 23 December 2010.
- The Reference Test – The OFT has a duty to make a reference to the Competition Commission if the OFT believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
- Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million; or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced.
- The Competition Commission may extend the 24 week period within which it is required to publish its report by no more than eight weeks if it considers that there are special reasons why the report cannot be published within that period.
- The text of these decisions will be placed on the Office of Fair Trading’s web site at www.oft.gov.uk as soon as is reasonably practicable.