Sotheby’s has released it’s capital allocation review this morning. The firm will be returning $300m to shareholders through a special dividend and repurchase $150m in shares, restructure the financing behind Sotheby’s Financial Services and continue to look at selling their real estate holdings. Here’s an excerpt from this morning’s release:
After allocating capital to support business-generating activities and growth initiatives, and to protect against downside risk, Sotheby’s will return a special dividend of $300 million to shareholders in March. In addition, Sotheby’s Board has authorized a $150 million share repurchase program, primarily as part of a new policy to offset annual employee stock dilution, with approximately $25 million of shares being repurchased by the end of 2014. Going forward, the Company intends to return any excess capital to shareholders on an annual basis, primarily through a special dividend.
Sotheby’s anticipates efforts in two other areas over the next 12 to 24 months to unlock significant value for shareholders: additional debt-financing of the Sotheby’s Financial Services loan portfolio, which could result in the return of an additional $150 million to $200 million to shareholders; and an evaluation of its real estate holdings in New York and London. The Company is weighing the possibility of selling its York Avenue headquarters and relocating, or selling a portion of the building and remaining in reconfigured space. Sotheby’s is now conducting a bidding process to explore these alternatives and expects to choose a path shortly. The Company is also evaluating its New Bond Street property in London and intends to engage in a similar review process with that property.
Sotheby’s also announced it will establish separate capital structures and financial policies for the Company’s two primary businesses – Agency (Auction and Private Sales) and Sotheby’s Financial Services. This structure will allow Sotheby’s to optimize funding and establish clear return thresholds for each business: 15% return on invested capital for the Agency business and 20% return on equity for Financial Services.