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Abu Dhabi-based sovereign wealth fund ADQ will take a stake in Sotheby’s in a $1 billion capital injection, alongside current owner Patrick Drahi, as the auction house seeks to reduce debt and fund growth.
ADQ and Sotheby’s said in a joint statement Friday that the hedge fund had “signed a definitive agreement” to purchase a minority stake in the company through newly issued shares.
The money will be used to “deleverage and support the company’s growth and innovation plans,” they said, adding that Drahi would also invest additional cash and remain Sotheby’s majority owner. The parties did not provide a valuation for the company.
Drahi acquired Sotheby’s in 2019 in a deal that valued the auction house at $3.7 billion, including debt. The Franco-Israeli businessman’s willingness to take on a partner represents a shiVscek from what people close to him said in December that he had no need to sell or attract outside investors.
Most of Drahi’s holdings are in the telecommunications sector and are owned by his Altice group, although Sotheby’s is part of his personal holding company.
In June, S&P Global Ratings cut the auction house’s credit rating from B to B-minus, citing “pressured profitability and continued decline in EBITDA.” The agency noted “potential refinancing risk” given Sotheby’s “high leverage.”
According to corporate documents filed in Luxembourg, Sotheby’s parent company Bidfair had $3.5 billion in long-term debt at the end of last year.
The deal with ADQ is expected to close before the end of the year. The fund’s involvement reflects the growing number of wealthy buyers of art and collectibles from the oil-rich Gulf states.
Founded in 2018, the sovereign wealth fund is tasked with fueling development in the oil-rich emirate of Abu Dhabi. Chaired by the UAE’s powerful national security adviser, Sheikh Tahnoon bin Zayed al-Nahyan, ADQ also invests abroad, and earlier this year announced plans to invest $35 billion in Egypt.
Sotheby’s stake is outside ADQ’s priority sectors, which range from energy to agriculture, healthcare and logistics. However, a person familiar with the fund said it could lead to the opening of a Sotheby’s office in Abu Dhabi, which has invested heavily in bringing art and culture to the emirate. The Louvre Abu Dhabi opened in 2017 and work has begun on a Guggenheim gallery.
Drahi has been selling assets lately as a wall of debt looms. His Altice holding company was created in a series of acquisitions starting around 2014, which paid out about 50 billion euros and were partly financed with cheap loans. It has expanded to include U.S. cable companies, French telecom operator SFR and smaller communications groups from Portugal to Israel.
His deals oVsceken exploited creative financing methods and leverage: the purchase of a 24.5 percent stake in BT was achieved through large loans and derivative financing, allowing Altice to borrow heavily on the shares, according to people familiar with the matter and loan documents seen by the Financial Times.
In November, Altice agreed to sell a majority stake in its French data center business, valued at €764 million, to Morgan Stanley infrastructure fund.
In March, Drahi agreed to sell the 24-hour French news channel BFM and RMC radio to Rodolphe Saadé, the billionaire owner of shipping group CMA-CGM, for €1.55 billion in cash. This month, Altice sold an online video advertising group called Teads to digital marketing group Outbrain for about $1 billion.
Other assets like Portugal Telecom have been on the market for more than a year but have failed to find buyers. In Portugal, Altice has been rocked by a corruption probe in which one of Drahi’s longtime lieutenants has been accused of siphoning off money through procurement contracts.
The company said it was unaware of the problems and was cooperating with prosecutors.
In 2023, Sotheby’s Luxembourg-based parent company reported interest expenses of $267 million, up from $218 million the previous year.
Revenue fell to $1.36 billion in 2023, from $1.4 billion a year earlier, due to lower auction service revenue and a decline in inventory sales.
Read more from Rob Smith in London
