LONDON -- Auction house Sotheby's will be bought by French-Israeli telecommunications entrepreneur Patrick Drahi in a deal worth $3.7 billion, the company said Monday.
The acquisition, by BidFair USA, which is owned by Drahi, returns the only publicly traded major auction house to private ownership after 31 years on the New York Stock Exchange.
"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," Tad Smith, Sotheby's chief executive, said in a statement. "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."
About $2.66 billion of the purchase price will be paid in cash, with Sotheby's shareholders getting $57 per share of their common stock. The figure is a 61% premium over the stock's closing price Friday. Sotheby's sharesclosed at $56.13 in trading Monday after the deal was announced.
In recent years, Sotheby's has lost out to its rival, privately owned Christie's, in the competition for several headline-grabbing consignments. Last year, Christie's sold the collection of Peggy and David Rockefeller for $835 million, the highest-grossing private collection in auction history. In 2017, Christie's sold Leonardo da Vinci's Salvator Mundi for $450.3 million, the highest auction price ever for a work of art.
Both auctions were underpinned by financial guarantees arranged by Christie's, which belongs to a holding company owned by another French billionaire, Francois-Henri Pinault.
"If you wanted to get something done, you went to the man with deep pockets," said Wendy Goldsmith, an art adviser based in London and a former head of 19th-century European art at Christie's, referring to the advantage enjoyed by an auction house owned by a wealthy individual.
Guy Jennings, a former deputy chairman of Sotheby's Europe who is now managing director of the Fine Art Group, an advisory company based in London, said Sotheby's had consistently lagged behind Christie's because of its status as a publicly traded company.
"They've not clawed back any ground," he said.
Sotheby's achieved $6.4 billion in total sales last year, fueled in part by a 37% increase in private transactions. It had net income of $108.6 million, down from $118.8 million the previous year. Christie's had $7 billion in total sales. As a private company, it does not report profits or losses.
Drahi, who founded telecom company Altice in the Netherlands in 2001, has been on a spending spree in recent years. He said in a statement that he remained "100% committed" to the telecom and media industries and that he was honored the Sotheby's board had recommended his offer.
"As a longtime client and lifetime admirer of the company, I am acquiring Sotheby's together with my family," said Drahi, who is known as a collector of 20th-century art, according to Jennings.
Drahi added that he was making the investment with a "very long-term perspective" and that he did not anticipate any changes in the company's strategy.
His acquisition comes about six years after Daniel Loeb, an activist Sotheby's shareholder, called for the resignation of Bill Ruprecht, the auction house's chief executive at the time, amid the auction house's struggles.
"We have heard many excuses -- but no good reasons -- why Sotheby's competitive position is deteriorating, such as: 'Christie's is buying market share and making uneconomic deals to make headlines,' or 'Christie's is private and doesn't have to disclose its guarantees,'" Loeb wrote in a letter urging Ruprecht's ouster and bemoaning a share price stalled at about $51.
Smith, the former chief executive of the Madison Square Garden company, succeeded Ruprecht as chief executive in 2015, but profitability has remained a continuing challenge for Sotheby's. In 2016, Sotheby's tried to galvanize its market share at the top end of the market by paying up to $85 million to acquire Art Agency, Partners, a boutique art advisory firm. But market share, and substantive profits, have proved elusive.
Drahi was born in Casablanca, Morocco. His parents were math teachers, and he showed an early aptitude for numbers. The family moved to France when he was a teenager, and he attended prestigious universities with the goal of becoming an electrical engineer.
After joining Dutch electronics giant Philips, he soon abandoned a traditional corporate career for the less-predictable life of a telecom entrepreneur. He drew inspiration from American moguls like John C. Malone who had made their fortunes in cable television. He founded a regional cable company in France that he later sold to an arm of Malone's empire, and then used the proceeds to found Altice in 2001.
He has continued to pursue ambitious deals in the years since. Under Drahi, Altice made pricey, often debt-fueled bids for cable assets around the world, including Hot Telecommunication Systems in Israel and Suddenlink in the United States. He even defeated a stalwart of French industry, Martin Bouygues, to acquire Vivendi's SFR division in a deal valued at $19 billion.
Altice gained a new level of prominence amid speculation that it was preparing to bid for Time Warner Cable in 2015, after regulators blocked Comcast's takeover of the company. The price turned out to be too high even for Drahi, and Charter Communications wound up buying Time Warner Cable.
Altice made a major cable acquisition in the United States later that year, leading a $17.7 billion takeover of Cablevision. Drahi has since put his stamp on the company, merging it with another cable operator that Altice owned and re-branding the operation as Altice USA. Altice has pursued other high-priced deals, including Altice USA's $200 million acquisition of online news network Cheddar.
Business on 06/18/2019