Shutterfly’s proposed acquisition of Spoonflower is expected to augment its growing consumer business through a diversification of product offerings, according to four sources following the company. As such, the company recently released flash numbers for the month of April along with 2021 and 2022 guidance, which projects a topline rebound for its business, said two of the sources.

The company is currently in the market with a USD 1.023bn term loan due 2026 to fund the partial consideration of the USD 225m acquisition of Spoonflower and refinance its existing loans. The proposed deal is talked at Libor+ 500bps with a 75bps floor and 99.5 OID.

The deal is already over-subscribed, as the issuer has guided for future growth on the Spoonflower acquisition along with a turnaround for its Lifetouch segment, which focuses on school photography. 

Lead Barclays is asking for commitments by tomorrow (30 June).

Spoonflower is a marketplace connecting makers and consumers with artists. Shutterfly is paying roughly three times Spoonflower’s 2020 sales, which grew 98% in 2020, according to one of the sources.

Pro forma the deal, net leverage will total roughly 5x, while net secured leverage comes to 4.2x, two of the sources said. The company is marketing pro forma adjusted EBITDA at USD 439m, including USD 22m of cost savings and USD 14m of Spoonflower EBITDA.

At close, liquidity will stand at USD 218m through USD 100m of revolver availability and USD 118m of cash.

Earnings-wise, Shutterfly posted USD 153m of revenue in April, up from USD 102m year-over-year, two of the sources said, adding that, on a segment basis, consumer revenue grew 6% to USD 74m, while Lifetouch revenue totaled USD 68m, compared to USD 21m last year. Lifetouch’s rebound came as more schools embarked on a hybrid in-person model, said the sources.

The company suffered during 2020 with school closures eroding the Lifetouch segment’s earnings power, which is expected to return in 2H21 as schools open up for the next school year, the sources said.

“Lifetouch is bouncing back to its embedded earnings power and Spoonflower will only add to the growth in the consumer business, which grew throughout the pandemic,” said one of the sources.

Adjusted EBITDA for April shook out to USD 32m, compared to USD 2m in April 2020.

On a revenue basis, Shutterfly put out guidance of USD 2.366bn for 2021 and USD 2.62bn for 2022, compared to USD 2.037bn in 2020. The company guided adjusted EBITDA of USD 412m for 2021 and USD 494m for 2022, compared to USD 340m in 2020, said two of the sources,

Shutterfly expects consumer revenue to total USD 1.443bn in 2021 and USD 1.544bn in 2022, compared to USD 1.385bn in 2020. Meanwhile, adjusted EBITDA is expected to total USD 371m in 2021 and USD 412m in 2022, compared to USD 404m in 2020.

Lifetouch revenue is expected to total USD 712m in 2021 and USD 843m in 2022, compared to USD 476m in 2020. Adjusted EBITDA is expected to total positive USD 34m in 2021 and USD 71m in 2022, compared to negative USD 79m in 2020.

Shutterfly’s institutional USD 621m L+ 600bps TLB due 2026 is quoted today at 100.141/100.766, slightly lower than recent levels at 100.321/101.018, according to a trader. The USD 252m L+ 650bps underwriter TLB-1 due 2026 is quoted at 100.083/100.75, slightly lower than recent quotes at 100.292/101.083, according to a trader. 

The USD 750m 8.5% senior secured notes due 2026 last traded at 110.092 to yield 3.619% on 17 June, compared to trades at 109.5 to yield 4.175% in early June, according to MarketAxess.

The acquisition of Spoonflower, which is subject to regulatory approvals and customary closing conditions, is expected to close in 3Q21. 

Messages with the company and with Barclays were not returned.

2021 Debtwire