Sotheby’s: The Last Publicly-Traded Major Auction House Acquired by French Billionaire
By Katie Beeton, 19.06.19
On Monday 17th June 2019, Sotheby’s announced that it will be bought by Patrick Drahi, founder of telecoms group Altice and long-time client of the auction house, in a deal worth $3.7bn. Sotheby’s shareholders will receive $57 a share from BidFair, Mr Drahi’s holding company, with shares seeing an increase by 58 per cent in trading when the deal was announced on Monday. This deal places the last major auction house still publicly traded back into private hands, after just over three decades of Sotheby’s being publicly traded on the New York Stock Exchange. The acquisition also means that the world’s two leading auction houses are now in the private ownership of French billionaires, with Christie’s auction house bought by the Pinault family in 1998.
Despite an overall flat art market, Drahi claims that the art market is picking up, signalled by Christie’s historic sale of Leonardo da Vinci’s lost Salvator Mundi painting for $450m in 2017 and Sotheby’s sale of Monet’s “Meules” (Haystacks) last month for $110.7m, a record price for an impressionist painting at auction, to name just a few record-breaking sales in recent years by the top two auction houses.
French-Israeli Drahi was born in Morocco in 1963 but moved to France at age 15, where he started his career at the electronics company Philips, before turning to telecommunications. Although Drahi is best known as a major telecoms entrepreneur, he is no newcomer to the art world - the French billionaire is an avid collector of Modern and Impressionist works of art, although his profile remains low in terms of buying, tending to collect pieces valued for under $5m. It has been suggested that Mr Drahi is now looking to raise his profile in the art world. Others have questioned whether Drahi is perhaps looking to compete with Pinault.
What does this deal mean for the future of Sotheby’s? In order to answer this question, a plethora of preliminary questions must first be asked. Dan Loeb, whose Third Point hedge fund is Sotheby’s second-largest shareholder with a 14.3 per cent stake, has criticized the auction house in recent years for its decline and, what Loeb refers to as, “wilful neglect.” As Sotheby’s is returned to private ownership, will this mean the end of activist interventions and public attacks on the auction house? Drahi does not envisage any immediate changes for the company’s strategy, but what long-term plans does the entrepreneur have for driving the company’s success? Drahi has a reputation for cutting costs but how will he apply that practice to Sotheby’s? What are the advantages of an auction house being privately owned by a wealthy individual and how soon will the auction house see these benefits?
Tad Smith, Sotheby’s CEO, said in a press release, “[Patrick Drahi] has a long-term view and shares our brand vision for great client service and employing innovation to enhance the value of the company for clients and employees. 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.” As a publicly-traded company, Sotheby’s did not have the same flexibility as its rival, Christie’s, having to answer to shareholders and explain market changes on a quarterly basis. This has meant that in recent years, Christie’s has had the advantage over Sotheby’s in winning top consignments, such as the collection of Peggy and David Rockefeller last year, which sold for $832.6m. As a private company, Sotheby’s will no longer have to report profits or losses and will be afforded a more flexible private environment which Smith believes will be of benefit to the company. On balance, the success of the acquisition will depend on market changes, cost savings in response to the move online and the company’s success in attracting profitable consignments.