Kohlberg Kravis Roberts has agreed to sell Fotolia, a European microstock photo provider, to US-listed Adobe for a total enterprise value of $800 million.
With the sale, KKR, which owned 50 percent of the business, has netted a 2x return and a 30 percent IRR, according to a source familiar with the matter. KKR declined to comment on returns.
KKR only bought its stake in Fotolia in June 2012, when it invested $150 million in the business, alongside TA Associates and the founding CEO.
KKR wasn’t planning on selling the business this year, Philipp Freise, member and head of the European Media & Digital Investment team at KKR, told PEI. “We got an inbound inquiry from Adobe and we discussed the deal in private in the last few months. Our founder and partner was very excited about the combination with Adobe and financially it also worked well for KKR to make a good return for our investors,” he said, adding that there was no auction process.
Having a 50 percent stake worked well for KKR and Fotolia, he added. “This is what I feel is the future of private equity; if you see a great company you don’t necessarily have to buy it outright. In Fotolia’s case we partnered with a venture capital firm and the founder. It’s similar to KKR’s investment in music rights business BMG alongside Bertelsmann and online media business Ringier”.
Founded in 2004, Fotolia is a large global marketplace for royalty-free images, graphics and HD Videos. Following KKR’s investment, Fotolia invested heavily into the team, almost doubling its work-force, and hiring critical talent in the areas of technology, search, marketing and direct sales. On the back of these investments, Fotolia significantly grew its revenue base and launched in more than 10 new countries.
KKR invested in Fotolia using its Europe Fund III, a $6.70 billion 2008-vintage. Following the sale of Fotolia, that vehicle is now approximately 40 percent divested, it is understood. In September, KKR sold its stake in Versatel, a German data and internet provider, to United Internet for €1.25 billion. In March KKR sold Avencis, a helicopter business it owned alongside Investindustrial, for €2 billion, netting KKR a return of close to 2.5x, a source told PEI at the time. In March, it also sold music rights management company BMG. In the same month, it listed Pets at Home on the London Stock Exchange.
KKR will be keen to return capital to investors as it is currently in market to raise its next European fund, KKR European Fund IV, which is targeting $3.5 billion. The Washington State Investment Board made an investment recommendation to that vehicle during a board meeting in June, according to a filing on the pension fund’s website.