In June 2019, Sotheby's, one of the world's premier auction houses, announced a monumental shift in its 275-year history—a $3.7 billion acquisition by BidFair USA, an entity owned by telecom mogul Patrick Drahi. The deal, which offered Sotheby's shareholders $57 per share*, a 61% premium over the company's last closing price, was unanimously approved and completed by October 2019.
The move to take Sotheby's private was driven by a plan to streamline operations and innovate digitally, away from the scrutiny and volatile demands of the public markets. For Sotheby's, this transaction promised a chance to focus more intensively on long-term strategies, including digital transformation, global expansion, and enhanced customer engagement, without the quarterly pressures public companies face.
Privately Winning
Sotheby’s financial performance has been strong since going private, with near record sales in 2023.
While private companies offer limited opportunity for investor participation, in the case of Sotheby’s, a certain tranche of bonds appear to be artfully priced.
In 2017, Sotheby's issued $400 million in 4.875% bonds set to mature in December 2025. The auction house has significantly repaid these bonds, leaving only $57 million outstanding. The small amount of debt in this tranche makes it easier for the auction house to manage and repay. Currently, these bonds are trading at a depressed price, offering a nearly 23% yield to maturity.
Although the rate of return is capped, earning more than 20% annually provides a compelling reason to indirectly participate in the art market.
*Sotheby’s stock ticker was BID
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