Getty Images scraps $3.7 billion merger with Shutterstock over UK scrutiny

By Jaspreet Singh

June 30 (Reuters) - Getty Images said on Tuesday it has called off its planned merger with Shutterstock due to the UK competition regulator's requirement to sell Shutterstock's editorial business as a condition for approval.

Two of the largest players in the licensed visual content industry announced the deal in January last year to create a $3.7 billion stock-image powerhouse geared for the AI era.

The collapse of the merger comes as both companies face growing competition from AI image generators that offer a cheaper and easier way to create visuals.

"We are not convinced that scale would have done more than stave off competitive pressures for a little while longer, but without the scale that the merger would bring, the outlook for each looks even more difficult," said Luke Stillman, a managing director at trend advisory firm Madison and Wall.

Shares of Getty were up about 1.1% at $0.87 in volatile extended trading, while those of Shutterstock plunged about 29% to $9.95.

Britain's Competition and Markets Authority in May conditionally approved the merger, requiring Shutterstock to sell its editorial arm to address concerns over the supply of news content in the country.

The regulator's independent inquiry group had found that the editorial business, if not sold, would reduce choice for UK media outlets and could ultimately raise prices for customers, as Shutterstock is one of the "few meaningful" rivals to Getty.

Getty will officially terminate the deal after the extended deadline of July 6, it said in a regulatory filing on Tuesday.

Shutterstock did not immediately respond to a Reuters request for comment.

Getty, which competes with Reuters and the Associated Press in providing photos and videos for editorial use, said its board also plans to engage a financial adviser to explore strategic financing options for the company.

(Reporting by Jaspreet Singh in Bengaluru; Editing by Maju Samuel)