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Before the deal was struck, Sotheby’s told lenders that its earnings before interest, taxes, depreciation and amortization (Ebitda) would plummet 88% to just $18.1 million in the first half of 2024.
Even excluding severance and other costs such as legal settlements from this profitability metric, Sotheby’s adjusted earnings before interest, taxes, depreciation and amortization fell 60% to $67.4 million.
The company had revenue of $558.5 million in the first six months of 2024, down 22% from $712.3 million in the same period last year, according to an earnings report shared with lenders.
The results cover Sotheby’s main auction business and do not include earnings from other units of parent company BidFair, such as its financial services arm, which provides loans to art collectors.
Sotheby’s declined to comment. Financial Times.
Sotheby’s sales slowdown follows Christie’s public report last month that auction sales fell 22% during the same period.
Sotheby’s results also show that the company intends to use $700 million of the planned capital raise to “reduce the company’s leverage,” with the transaction with ADQ expected to close in the fourth quarter of 2024.
The ADQ sovereign wealth fund was established in 2018 with a mission to promote development in the oil-rich emirate of Abu Dhabi and is chaired by Sheikh Tahnoun bin Zayed Al Nahyan, the UAE’s powerful national security adviser.
The Louvre Museum Abu Dhabi opened in 2017.
Sotheby’s reported more than $1.8 billion in net “long-term debt” at the end of June, meaning it will still have more than $1 billion in such debt even after the financing is completed. The company’s total liabilities are $4.3 billion.
Sotheby’s has also borrowed money in creative ways this year, with its financial services subsidiary raising $700 million in April by issuing new bonds backed by loans Sotheby’s has made to art collectors.
Drahi took over Sotheby’s in 2019 in a leveraged buyout, returning the century-old auction house to private ownership three decades after it was listed on the New York Stock Exchange and putting him in direct competition with French billionaire François Pinault, owner of Christie’s.
The deal gives Drahi a trophy asset in addition to the Altice business empire he built from a niche cable TV company into a global telecommunications conglomerate through a decade-long acquisition spree.
Currently, facing rising interest rates and market concerns about the criminal investigation of one of Altice’s co-founders, Drahi has been selling assets to address the group’s more than $60 billion in debt.
Earlier this month, Drahi agreed to sell nearly 25% of BT Group to the conglomerate of Indian billionaire Sunil Bharti Mittal, which had borrowed heavily from banks in previous years to buy the stake in the British telecom operator.
By Robert Smith in London. Additional reporting by Josh Spero in London.
© Financial Times
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