Two months after Sotheby’s announced it would sell a minority stake in its business to ADQ, an Abu Dhabi sovereign wealth fund, the auction house has confirmed the deal has gone through.
“They’re coming in as equity holders of the business with a very long-term investment horizon, which is exactly the type of partnership we were looking for,” says Charles Stewart, Sotheby’s CEO. The auction house’s owner, telecommunications billionaire Patrick Drahi, has also put new funds into the company and retains his majority stake. Together with ADQ’s investment, the cash infusion into the business totals approximately $1 billion (R17.7bn).
Sotheby’s will form a board of eight directors plus the CEO; ADQ will have three out of the nine representatives. Asked if those three seats are roughly proportionate to its investment in the company, Stewart says “yes” but declines to elaborate. A representative from ADQ declined to comment.
Financial Picture
ADQ’s investment comes at a rocky time for the auction house, which has struggled along with the rest of the art market through a prolonged slump. In June, S&P Global Ratings downgraded Sotheby’s credit and raised concerns about its ability to refinance. After ADQ’s investment was announced in August, the Financial Times reported the company’s core earnings had dropped 88% in the first half of the year. That news was followed by a series of Puck and Wall Street Journal articles that alleged the auction house was generally on shaky financial footing. Stewart disputes much of the reports without addressing most of the news specifically. “There’s a bunch of misleading information,” he says.
Last year the company reported consolidated sales of $7.8bn. Overall sales for the first half of 2024 were $3.2bn, according to a company spokesperson, down 20% from a year earlier-in line with rival auction house Christie’s, whose numbers were down 22% in the same period. Today, Sotheby’s owns more than $1bn in real estate assets, according to the spokesperson.
Drahi took the company private in 2019 for $3.7bn. He used about $1.1bn in debt for the acquisition, Bloomberg reported at the time. Since then, Sotheby’s says that luxury revenue has doubled, from 15% of its net revenue to 26%, and that private sales revenue-meaning art transactions the auction house brokers behind closed doors-is up 40%, from 9% to 12% of its net revenue.
Last month, Bloomberg reported the auction house would use much of ADQ’s investment to pay down its debt; a spokesperson clarified that it would use roughly $800 million of the funds to pay down about $1.65bn in fixed debt. “A majority of it will be to reduce debt,” Stewart says, adding that the investment “completely resets our balance sheet and turns our balance sheet into a source of strength.”
Future Plans
Another looming question is the fate of the Breuer building. The auction house announced in June 2023 that it would buy the landmarked former home of the Whitney Museum of American Art on Manhattan’s Madison Avenue; the price was about $100m, according to people familiar with the deal. But Sotheby’s has yet to close on the property, which it plans to make its New York headquarters. Stewart now says he expects the deal to close imminently.
Looking ahead, Stewart says ADQ’s investment is “a sign of our collective belief amongst our shareholders-certainly of our executive team-in the opportunities directly and indirectly relating to the Middle East,” adding that the money could be seen as an indication of the company’s future expansion into the region. “That’s one of the several very exciting opportunities that this investment helps nurture and encourage.”
BLOOMBERG