Shutterfly soars on initial offer for Kodak’s online-photo unit

Shutterfly Inc. rose as much as 15 percent in early trading after announcing an initial bid to buy Eastman Kodak Co.’s online-picture business for $23.8 million.

Shutterfly, based in Redwood City, California, rose 14 percent to $30.74 at 8:51 a.m., after earlier touching $31.07. The stock fell 1.6 percent to $26.91 at yesterday’s close in New York and has dropped 36 percent in the past 12 months.

Kodak, the Rochester, New York-based photography pioneer that filed for bankruptcy protection in January, agreed to the so-called stalking horse bid in a court-supervised auction process, according to a statement yesterday.

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. Squali recommends buying the stock. Snapfish, American Greetings Corp., and Vistaprint NV could make competing offers for Kodak Gallery after the auction receives court approval, Squali said.

The deal would transfer the accounts of 75 million Kodak Gallery users to Shutterfly, Kodak said. The service allows users to upload photos, organize galleries, order prints or photobooks, and share pictures. Shutterfly’s bid is the first in an auction process that Kodak is seeking to have approved in U.S. bankruptcy court by late March.

The case is In re Eastman Kodak Co., 12-10202, U.S. Bankruptcy Court, Southern District of New York (Manhattan)