Eastman Kodak Co. today announced it has entered into an agreement with Shutterfly to sell certain assets of its Kodak Gallery on-line photo services business for $23.8 million.

According to Kodak, this agreement comprises the initial, stalking-horse bid in a Court-supervised auction process under Section 363 of the U.S. Bankruptcy Code, with the goal of maximizing the value of its assets.

The deal would include the transfer of customer accounts and images in the U.S. and Canada from Kodak Gallery to Shutterfly. Customers who do not want their photos transferred to Shutterfly will be able to opt out and to retrieve their images through free downloads or by purchasing DVDs.

Pradeep Jotwani, president, Consumer Businesses and chief marketing officer, Kodak, said an appealing aspect of the agreement is that it guarantees the preservation and protection of consumer’s photos, while offering them continuity while their accounts are securely and smoothly transferred to Shutterfly.

Under the terms of the agreement, Kodak will seek U.S. Bankruptcy Court approval of sale and auction procedures by late March, with a target of late spring for completion of the sale process. Other potential buyers may submit alternative bids to Kodak for consideration.

“This sale is consistent with our objective of focusing Kodak on a core set of businesses in which we can most profitably leverage our technology and brand strengths, and provides a well-proven mechanism for ensuring that Kodak receives maximum value from these assets,” Jotwani said. “Kodak Gallery is a unique property, with more than 75 million users, and an ability to attract new members through innovative customer offerings such as its category-leading popular mobile apps.”

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