SHUTTERSTOCK
The French-Israeli media mogul and art collector Patrick Drahi has reached an agreement to acquire Sotheby’s through BidFair USA, a company he wholly owns, in a deal that values the company at about $2.7 billion.
This morning, Sotheby’s and Drahi announced the deal, which will pay holders of Sotheby’s stock $57 per share in cash, a premium of 61 percent over its price at the close of the market on Friday, when it was trading at about $35. The enterprise value of the deal is $3.7 billion.
Sotheby’s, which dates its founding back to 1744 in London, had been a publicly held company for the past 31 years on the New York Stock Exchange. The purchase by BidFair USA will entail the company becoming privately held once again, like its arch-rival Christie’s.
Domenico De Sole, the chairman of Sotheby’s, said in a statement, “Following a comprehensive review, the board enthusiastically supports Mr. Drahi’s offer, which delivers a significant premium to market for our shareholders.” The transaction is expected to go through in the fourth quarter of this year, following approval by shareholders.
In a letter to press, Drahi said that he does “not anticipate any change to the company’s strategy. Management and their exceptional teams and talent around the world will continue to operate with my full support.”
The New Owner
Drahi, who is 55, was born in Casablanca, Morocco, and currently lives in Zermatt, Switzerland. The majority of his business deals have involved telecommunications and cable companies throughout Europe and the United States. He is the founder and controlling shareholder of the Netherlands-based telecom company Altice. According to Forbes, his net worth stands at approximately $9.1 billion.
Drahi is also the founder of i24news, an Israel-based international news broadcast that is part of Altice. In 2015, he brought his telecom empire to the U.S., creating Altice USA by acquiring and combining cable operator Suddenlink and the cable-television company Cablevision in a $17.7 billion deal. Most recently, Altice USA acquired digital news company Cheddar.
He said in his statement to press, “With my family, we are very enthusiastic to build together with its current management and their teams the future of Sotheby’s, a fascinating and multi-secular company with such a celebrated history of uniting people all over the world through culture and arts.”
The Industry Reacts
The decision to take Sotheby’s private means that its management will no longer be answerable to public shareholders, potentially allowing it to compete more vigorously against Christie’s, which is privately held by French billionaire François Pinault.
“Expect more competition for the most valuable consignments, which benefits top collectors,” Evan Beard, national art services executive at Bank of America, said in an email. He added, of Sotheby’s going private, “The art market has lost its one publicly traded economic bellwether and sentiment monitor. What the market has lost in transparency it may gain in flexibility.”
Asked about the transaction, dealer Larry Gagosian, whose 17-gallery empire competes with the auction houses in the resale market, told ARTnews, “It’s certainly a vote of confidence for the art market. They are clearly banking on art prices continuing to rise.”
Alex Logsdail, of Lisson gallery, saw a playing field potentially emerging in the auction world as a result of the deal. “Invariably, because all three of the major auction houses will now be private,” he said, “it will probably mean that they will be far more competitive with guarantees and irrevocable bids in a way that they haven’t been before.”
The purchase comes after a number of tumultuous years for Sotheby’s. In 2013, the activist hedge-funder and art collector Daniel S. Loeb began publicly lambasting the house’s leadership, accusing it of poor management. In 2014, its CEO of 14 years, William F. Ruprecht, stepped down and was replaced the next year by Tad Smith.
After falling nearly to $20 a share in early 2016, Sotheby’s stock began climbing and peaked at just short of $60 last year; since then, it has slid to as low as $32.
The Deal
The purchase came about through a cast of high-power players, with LionTree Advisors as financial adviser to Sotheby’s and Sullivan & Cromwell in the role of its legal counsel. BNP Paribas and Morgan Stanley were BidFair’s financial advisers, with BNP Paribas serving as sole financing provider; Hughes Hubbard & Reed and Ropes & Gray International were its legal advisers.
CEO Tad Smith said in a statement, “Patrick founded and leads 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 great client service and employing innovation to enhance the value of the company for clients and employees.”
Sarah Douglas contributed reporting.