Market Overview

Shutterfly Taking Advantage of Kodak's Restructuring


On January 19th, Eastman Kodak Company (OTC: EKDKQ) announced that it voluntary filed petitions for Chapter 11 business reorganization.

Business reorganization is intended to bolster liquidity, monetize non-strategic intellectual property, fairly resolve legacy liabilities, and enable companies to focus on its most valuable business lines. And that is exactly what Kodak did when Kodak announced a sales agreement with Shutterfly (NASDAQ: SFLY) for Kodak's online photo service business. Shutterfly will likely benefit the most as the value of the business will eventually be bought for pennies on the dollar.

Shutterfly provides an Internet-based social expression and personal publishing service that enables consumers to share, print, and preserve their digital photos through the medium of photography in the United States. You can consider Shutterfly as a personal graphics company in the new "social media" industry.

Eastman Kodak was once one of the world leaders in digital imaging, now just a shell of its prior self, as asset sales in part for the Chapter 11 restructuring has already begun.

Yesterday, Kodak announced that it has entered into an agreement with Shutterfly for the proposed sale of certain assets of its KODAK Gallery on-line photo services business for $23.8 million. The terms of the agreement include the transfer of Gallery customer accounts and images in the U.S. and Canada to Shutterfly. The agreement comprises the initial, stalking horse bid in a Court-supervised auction process under Section 363 of the U.S. Bankruptcy Code that will ensure the maximization of value for the assets.

Commenting on the agreement, Kodak's Chief Marketing Officer said, “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, and provides a well-proven mechanism for ensuring that Kodak receives maximum value from these assets."

Under the terms of the Agreement, Kodak will seek U.S. Bankruptcy Court approval of sale and auction procedures by late March. Under these proposed procedures, other potential buyers may submit alternative bids to Kodak and seek to establish the superiority of their alternative bid. Kodak is targeting completion of the sale process this spring.

Currently, shares of Shutterfly are benefiting greatly, trading up over 18% at $31.87 per share.

Posted-In: News Asset Sales Legal M&A Events Tech Best of Benzinga


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