Sotheby's isn't necessarily going to become more like Christie's just because it is going private; Christie's London Imp-Mod Evening Sale = £36.4m

This commentary by Marion Maneker is available to AMMpro subscribers. (The first month of AMMpro is free and subscribers are welcome to sign up for the first month and cancel before they are billed.)

The second-day stories on Patrick Drahi’s agreement with Sotheby’s board to take the auction house private have exposed a misunderstanding of the role Sotheby’s listing on the NYSE plays in the company’s management. Confusing cause and effect while ignoring the widely diverging business strategies that the major auction houses have embraced, the press seems to think that Sotheby’s is going private to solve a business problem.

It isn’t. There are some indications, including from Drahi’s own statement, that buying the company helps Drahi move himself and the center of gravity of his business empire closer to the United States. What we do know from the sale is that Drahi instigated it. There’s no indication that he took the company private for strategic reasons. The Chairman and CEO of Sotheby’s statements supporting the move were no more than anodyne cheerleading. The overwhelming fact of the sale is that Sotheby’s is being taken private so Patrick Drahi can be its sole owner, not a shareholder.

Whatever Drahi’s motivations for acquiring Sotheby’s, the company is going private because Drahi is able to borrow enough money to buy it. Indeed, the entire point of the activist campaign to change Sotheby’s management was to execute a plan that would unlock value through the public markets. After five years, and two solid runs at breaking through the stock’s price ceiling, it isn’t a surprise that the remaining activist instigator would sell out to an opportunistic buyer able to assemble ready cash. So while the sale is a red letter day for all involved, especially Sotheby’s shareholding employees, it is also a reluctant admission that the really big payday that would come from staying public is just never going to arrive.