Sotheby's Sold: another rich Frenchman buys out art auction house

Last Updated: Tue, Jun 18, 2019 19:18 hrs
File photo of French billionaire Patrick Drahi.

French Israeli telecom mogul Patrick Drahi and his family will soon be the owners of art auction house Sotheby's.

On Monday, Sotheby's announced a definite agreement on a deal sponsored by Patrick Drahi and his family. The agency said that as part of the deal, Bidfair USA, a company owned by Drahi, valued the art-house at $3.7 billion.

The board of directors approved a bid that would offer shareholders including employee shareholders $57 in cash per share of Sotheby's common stock. $2.6 billion from that agreement will be paid in cash. The art-house said that the offer price represented a premium of 61% to Sotheby’s closing price on June 14, 2019, and a 56.3 percent premium to the company’s 30 trading-day volume weighted average share price

The deal is subject to customary conditions, including regulatory clearance and shareholder approvals and was likely to close in the fourth quarter of 2019. On Tuesday, shares of Sotheby trading on the New York Stock Exchange, soared to a 11 month high.

Tad Smith, Sotheby’s CEO, was quoted in an official note as saying, "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."

"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," added Smith.

Established in 1744, Sotheby's mostly remained a privately held entity until 1977. And, with sales of art-collectibles waning, the headquarters was soon shifted to North America. In 1988, the art-house listed on the NYSE, joining a rare league of old establishments going public.

Domenico De Sole, Chairman of Sotheby’s Board of Directors, said, "After more than 30 years as a public company, the time is right for Sotheby’s to return to private ownership to continue on a path of growth and success."

According to the New York Times, the board at Sotheby's may have agreed to the deal, because being a public company may have had some disadvantages. Public firms are mandated to report and justify every decision taken. Secondly, explanations on quarterly sales numbers, market fluctuations, and regular assurances to assuage investor sentiments too add to the compliance burden.

Being a privately held company, Sotheby's can avoid reporting on every business decision, including reporting of its profit and quarterly balances. Also, the firm's major rival, Christie's has remained private since 1999. Christie's did sales of $7 billion in 2018, while Sotheby's achieved $6.4 billion.

The deal is interesting considering that this would be the second instance in recent time that a French man acquired an art-house. Auction house Christie's (established 1766), which also remained a publicly traded company until 1999 was acquired by Groupe Artemis, the holding company of French billionaire Francois Henri Pinault. Christie's too was established in the UK and had exchanged ownership during 1998. Pinault, the husband of Mexican American actress Salma Hayek, is the third richest French and the 23rd richest man on the Bloomberg Index with fortunes estimated at $36 billion.

In the case of Sotheby's, 55 year old Drahi is France's sixth richest businessman. According to Bloomberg's Live index of fortunes, Drahi is ranked as the world's 180th richest man with an estimated earnings of $ 8.45 billion.

In the world of art-house and auctions, Christie's and Sotheby's are not just rivals, but also occupy a major market-share. Digest this, out of the fifteen highest historical auctions that saw sales of over $100 million between 2012-18, Christie's and Sotheby's, each accounted for seven, the remaining one was organized by Hong Kong based Poly auction house.

Data from auction tracker, Artprice.comfor the first half of 2018 offers an estimate on the duopoly in the auction market.

Artprice's data from the first half of 2018 shows 30 auction houses generating a turnover of $ 7.2 billion. Of this, Sotheby's and Christie's accounted for a whopping 72.89 percent or $ 5.25 billion. Also, from the total of 52,520 lots auctioned, Sotheby's & Christie's accounted for 28 percent or 14,747 lots. In terms of highest auction price, Sotheby's hammered the highest price of $157 million while Christie's settled for the second rank with a deal of $ 115 million. The third richest was by auction house Phillips for $ 57 million.

Post the fourth quarter, ownership of the world's two largest auction houses will remain with two French billionaires. Would that be an odd observation or does it mean that Paris will unofficially be crowned as the art capital of the world?

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