Kodak to sell online photo services business to Shutterfly

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Eastman Kodak Co. has agreed to sell Kodak Gallery, its online photo services business, to Shutterfly Inc. for $23.8 million, Reuters reported.

Kodak Gallery, a digital photo storage and sharing site, has more than 75 million users, according to Bloomberg News. Kodak put the service up for sale in a court-supervised auction as part of its business restructuring through Chapter 11, MarketWatch reported.

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According to the Street:

Shutterfly won't take on the Kodak brand or any of its operating assets or liabilities, and the deal also needs to be approved by a bankruptcy judge after a bidding process, which is expected later in March.

With this deal, Shutterfly would “eliminate a sizable competitor and solidify its position as the largest player in online consumer print,” Youssef Squali, an analyst at Jefferies & Co., wrote in a note today, Bloomberg News reported.

Redwood City, Calif.-based Shutterfly has been battling discounting by rivals such as Hewlett-Packard Co.'s Snapfish and American Greetings Corp., MarketWatch reported.

The purchase could also add $60 million in annual revenue, depending on the buyer’s luck in keeping Kodak Gallery's customers, Goldman Sachs analysts wrote in a note to clients today, Marketwatch reported.

Shutterfly shares, which trade on the Nasdaq, rose 18 percent to $31.70 in extended trading today following the news, Reuters reported.

Shutterfly said it would transfer Kodak Gallery customer accounts and images in the United States and Canada to Shutterfly, but customers will be allowed to opt out, Reuters reported.

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