Sotheby’s has been sold to the French/Israeli Media Tycoon Patrick Drahi for $3.7 Billion, taking the second largest Auction House in the world from public ownership to private.
For the last few years, the 275-year-old auction house has struggled with a board of directors in turmoil. Shareholders threatening a hostile takeover led by Dan Loeb, an American hedge fund manager, and chief executive of Third Point LLC, a New York-based hedge fund with a portfolio worth $14 billion. Loeb sued the directors of Sotheby’s in order to force the removal of ‘poison pill protections’ that prevented ‘him from acquiring more seats on the board.
This acquisition will provide ‘Sotheby’s with the opportunity to accelerate and compete with Christie’s
Loeb, Sotheby’s largest shareholder mounted a hostile attack on the company to force changes in the top management. The board consistently blocked Loeb from buying a larger share in the company. In 2017 they announced a massive share sell-off to existing shareholders providing they didn’t hold more than ten percent of the company. This excluded Loeb from acquiring a larger stake in Sotheby’s. The strategy made it far more expensive for Loeb to build a power base in the company.
‘Sotheby’s shareholders are to receive $57 Per Share in a cash transaction valued at $3.7 Billion. The acquisition results in ‘Sotheby’s signing a definitive merger agreement to be acquired by BidFair USA, an entity wholly owned by media and telecom entrepreneur/ art collector, Patrick Drahi. Under the terms of the deal, which was approved by ‘Sotheby’s Board of Directors and shareholders.
Sotheby’s common stock in a transaction with an enterprise value of $3.7 billion. The offer price represents a premium of 61% to ‘Sotheby’s closing price on June 14, 2019, and a 56.3% premium to the ‘company’s 30 trading-day volume weighted average share price. The transaction would result in ‘Sotheby’s returning to private ownership after 31 years as a public company traded on the New York Stock Exchange.
Tad Smith, ‘Sotheby’s CEO, said, “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. Known for his commitment to innovation and ingenuity, Patrick founded and led some of the most successful telecommunications, media and digital companies in the world. He has a long-term view and shares our brand vision for excellent 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. It positions us very well for our future, and I strongly believe that the company will be in excellent hands for decades to come with Patrick as our owner.” Domenico De Sole, Chairman of ‘Sotheby’s Board of Directors, said.
Following a comprehensive review, the Board enthusiastically supported Mr. ‘Drahi’s offer, which delivers a significant premium to market for our shareholders. 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. I am honoured that the Board of ‘Sotheby’s has decided to recommend my offer, Patrick Drahi commented.
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.” The closing of the deal is subject to customary conditions, including regulatory clearance and shareholder approvals, but is not subject to the availability of financing.
The transaction is expected to close in the fourth quarter of 2019 following shareholder approval. LionTree Advisors is serving as financial advisor to ‘Sotheby’s in connection with the transaction, and Sullivan & Cromwell LLP is serving as the ‘company’s legal counsel. BNP Paribas and Morgan Stanley are acting as financial advisors to BidFair, BNP Paribas acted as sole financing provider, and Hughes Hubbard & Reed LLP and Ropes & Gray International LLP are serving as its legal advisors. For further information regarding all terms and conditions contained in the definitive merger agreement, please see the ‘Company’s Form 8-K, which was filed today in connection with this transaction.
‘Sotheby’s has been uniting collectors with world-class works of art since 1744. ‘Sotheby’s became the first international auction house when it expanded from London to New York (1955), the first to conduct sales in Hong Kong (1973), India (1992) and France (2001), and the first international fine art auction house in China (2012).
Sotheby’s presents auctions in 10 different salesrooms, including New York, London, Hong Kong, and Paris, and ‘Sotheby’s BidNow program allows visitors to view all auctions live online and place bids from anywhere in the world. ‘Sotheby’s offers collectors the resources of ‘Sotheby’s Financial Services, the ‘world’s only full-service art financing company, as well as the collection, artist, estate & foundation advisory services of its subsidiary, Art Agency, Partners. ‘Sotheby’s presents private sale opportunities in more than 70 categories, including S|2, the gallery arm of Sotheby’s Global Fine Art Division, and three retail businesses: ‘Sotheby’s Wine, ‘Sotheby’s Diamonds, and ‘Sotheby’s Home, the online marketplace for interior design. ‘Sotheby’s has a global network of 80 offices in 40 countries and is the oldest company listed on the New York Stock Exchange 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 members of his team to define our future.
In 1983 a group of investors including the US millionaire Alfred Taubman) purchased and privatised Sotheby’s. It was initially incorporated as Sotheby’s Holdings, Inc. Taubman took Sotheby’s public in 1988, listing the company’s shares on the New York Stock Exchange, making Sotheby’s the oldest publicly traded company on the NYSE under the ticker symbol “BID.”
In June 2006, Sotheby’s Holdings, Inc. reincorporated in the State of Delaware and was renamed Sotheby’s shortly after.
In February 2000, A. Alfred Taubman and Diana (Dede) Brooks, the CEO of the company, stepped down amidst a price-fixing scandal. The FBI had been investigating auction practices in which it was revealed that collusion involving commission fixing between Christie’s and Sotheby’s was occurring. In October 2000, Brooks admitted her guilt in hopes of receiving a reduced sentence, implicating Taubman. In December 2001, jurors in a high-profile New York City courtroom found Taubman guilty of conspiracy. He served ten months of a one-year sentence in prison, while Brooks received six-month home confinement and a penalty of US$350,000. Sotheby’s was sentenced to pay a fine of US$45 million. No staff from Christie’s were charged.
Growing out of the four-year criminal antitrust investigation by the United States Department of Justice, some 130,000 buyers and sellers filed a class-action lawsuit, arguing they were cheated in the price-fixing conspiracy by Sotheby’s and Christie’s. In 2001, the United States District Court for the Southern District of New York gave final approval to a US $512 million agreement. The structure of the settlement was said to have helped stave off insolvency for both companies, especially the publicly held Sotheby’s.
At the time of the scandal, 59 percent of the company’s Class A shares were owned by Baron Funds.
Sotheby’s now joins its main rival Christie’s which is privately owned by luxury goods magnate Francois Pinault.
The closing of the deal is subject to customary conditions, including regulatory clearance and shareholder approvals, but is not subject to the availability of financing.