Sotheby’s Auction House Goes Private After $3.7 Billion Sale

Sotheby’s offices in New York City (image via edenpictures’s Flickrstream)

After more than 30 years on the stock exchange, the auction house Sotheby’s will leave the public market after its $3.7 billion sale to BidFairUSA, a company owned by the French-Israeli media mogul Patrick Drahi.

News of the deal has shocked traders into a buying frenzy. All shareholders, including employees, will receive $57 per share of Sotheby’s common stock — representing a premium of 61 percent to the closing price of the company’s stock as of June 14. Shortly after the buyout was announced, share prices for the company began climbing toward the premium. At the time of writing, Sotheby’s share price has risen almost 58 percent to $55.79.

Plans to go private were announced earlier today in a statement from Sotheby’s chief executive, Tad Smith. “Patrick Drahi is one of the most well-regarded entrepreneurs in the world, and on behalf of everyone at Sotheby’s, I want to welcome him to the family,” he said. “This acquisition will provide Sotheby’s with the opportunity to accelerate the successful program of growth initiatives of the past several years in a more flexible private environment.”

Sotheby’s has had a difficult start to the fiscal year, reporting a $7.1 million loss in the first quarter after reporting a $6.5 million loss in the same period last year. Revenues for the auction house typically hover around the billion-dollar mark; in 2016, the number was $805.3 million. By comparison, Christie’s total revenue hit $6.6 billion in 2017 thanks to a boost by the Salvator Mundi sale.

In recent years, Sotheby’s has struggled to compete with Christie’s, its largest competitor. But like its rival, Sotheby’s will soon belong to the portfolio of a wealthy French billionaire (Christie’s is under Groupe Artémis, owned by François-Henri Pinault). The move is certainly seen as advantageous for Sotheby’s executives. In his statement, Smith said that the shift would allow a “more flexible private environment” that would enable the firm to “accelerate” its growth initiatives.

For art market experts, Sotheby’s return to privacy is somewhat worrisome for research purposes. This marks the presumable end to a paper trail of public records, filings, and disclosures that have provided scholars with significant data points for analyzing how the industry functions.

But it’s not unprecedented for the auction house to vacillate between public and private statuses. It first became a UK public company in 1977 before going private in 1983 when it was acquired by Alfred Taubman. It returned to the market through the New York Stock Exchange in 1988 with around 5.5 million shares priced at $18 per stock.

“I am honored that the Board of Sotheby’s has decided to recommend my offer,” Drahi said in the statement.  “Sotheby’s is one of the most elegant and aspirational brands in the world.  As a longtime client and lifetime admirer of the company, I am acquiring Sotheby’s together with my family.  We thank Domenico and the rest of the Sotheby’s Board for its support and look forward to getting started with Tad and the wonderful members of his team to define our future.”

He is said to have “a long-term view” for his investment in the auction house. The transaction is expected to close in the fourth quarter of 2019 following shareholder approval. According to Drahi, the acquisition “will be funded by financings arranged and underwritten by BNP Paribas as well as by equity provided from my own funds.”

“To help fund this transaction, I do not intend to sell any shares in Altice Europe NV; my intention is to monetize a small position in Altice USA up to $400m by the end of the year.”