• Jessica E. Whiffen

French billionaire is buying Sotheby’s for $2.7 Billion

French billionaire Patrick Drahi is buying Sotheby’s BID -0.04% for $2.7 billion, ending the storied auction house’s 31-year run as a public company as it seeks to expand its digital business targeting art collectors more accustomed to online shopping than live auctions.

Mr. Drahi, a keen buyer of art who has also built a telecommunications empire spanning multiple continents, will pay $57 a share in cash for New York-based Sotheby’s—a rich, 61% premium to where the auction house’s shares closed Friday. He is spending more than $1.5 billion of his money and will fund the rest of the purchase price with debt, people familiar with the matter said.

Including about $1 billion of Sotheby’s existing debt, the value of the deal is $3.7 billion.

The buyout could give a short-term competitive boost to Sotheby’s, which has often trailed behind its larger, privately held rival Christie’s International over the past two decades. Christie’s, based in London, is owned by Groupe Artémis, the holding company of luxury-goods magnate and well-known collector, François-Henri Pinault—also a French billionaire.

Both auction houses fared well last year amid a surge in buying from newly wealthy international collectors, but in an industry that is essentially a duopoly, Sotheby’s came up short. Last year, Sotheby’s sold $6.4 billion in art, up 16% from the prior year, compared with Christie’s $7 billion in sales, up 6% from 2017. Sotheby’s share price suffered as a result, falling 40% over the past year through Friday’s close.

Shares of Sotheby’s rose 59% to $56.13 in trading Monday.

“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,” Sotheby’s Chairman Domenico De Sole said in a statement.

There are no immediate plans to change the business under Mr. Drahi, but Sotheby’s expects to invest more in building its digital business. This includes everything from adding more online-only art sales as well as retooling data to better pair prospective buyers with works. Last year, Sotheby’s sold $220.4 million worth of art online, up 24% from the year before. The house said 37% of all its lots sold last year were purchased online.

Sotheby’s has gone private before. The house that began auctioning books and estates in London in 1744 became a public company in the U.K. in 1977 before it was bought by Michigan shopping-mall tycoon A. Alfred Taubman in 1983. Sotheby’s went public again in 1988. Mr. Taubman was convicted in 2001 and jailed for nearly a year for his part in embroiling the company in a price-fixing scheme with Christie’s—a scandal that some said set the course for Christie’s surge to the top of the industry, as Sotheby’s bore the greater share of subsequent fines.

As Sotheby’s and Sotheby’s International Realty are under separate ownership, Sotheby’s International Realty is not impacted by this transaction. Sotheby's Holdings, the owner of the auction house, sold its real estate brokerage firm and the brand's licensing rights to what is now Realogy in 2004. Sotheby’s International Realty Affiliates LLC remains a wholly owned subsidiary of Realogy Holdings Corp.

Sotheby’s International Realty enjoys an extraordinary partnership with the auction house – including client referrals, worldwide event sponsorships, a realty desk in Sotheby’s global headquarters and advertising opportunities in Sotheby’s print and electronic communications. We do not expect any changes to these programs, and look forward to collaborating with Sotheby’s management moving forward under their new ownership.

Source: The Wall Street Journal

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