Shutterfly jumps on acquisition of Kodak's photo sharing site

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(Global Markets) - Shares of Shutterfly Inc (SFLY.O) jumped as much as 18 percent on Friday, after the photo-sharing services company said it would acquire bankrupt Eastman Kodak Co's (EKDKQ.PK) online photo services business for $23.8 million.

Kodak said the deal with Shutterfly followed a "stalking horse" bid -- a starting bid or minimally accepted offer that other bidders must surpass in a court-supervised auction -- from the web-based personal publishing service.

Analysts expect the deal to boost Shutterfly's earnings in 2012 and solidify its position in the online print market.

"By taking out the number three player with an estimated about $70 million in FY11 revenues, Shutterfly will eliminate a sizable competitor and solidify its position as the largest player in online consumer print," Jefferies said in a note.

Kodak is the number three player in the sector behind Shutterfly and Hewlett Packard's (HPQ.N) Snapfish.

Kodak Gallery -- which enables users to store and share their own images and create custom printed photobooks, cards and albums -- has more than 75 million users.

"The deal not only offers 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," Baird Equity said.

The brokerage estimates Kodak's Gallery business to generate revenue between $50 million and $70 million.

Shares of the Redwood City, California-based company, which have lost about half their value since their year high in April, jumped 18 percent to $31.84 Friday on the Nasdaq. (Reporting by Rachana Khanzode in Bangalore; Editing by Saumyadeb Chakrabarty)