Taubmans lose hold on Sotheby's
September 11, 2005 The Guardian by Jill Treanor
The Taubman family loosened its grip on the Sotheby's auction house yesterday through a deal that allowed it to cash in $168m (?90m) of shares.
The deal allows Alfred Taubman, who served a prison term after being convicted of fixing commissions with Sotheby's rival Christie's, and his family to almost halve their holding in the auction group to 12.4%.
Mr Taubman, 81, has not been chairman since 2000 but his son Robert is still on the board and will remain so after the transaction.
The deal, which ends years of speculation about the Taubmans' intentions for their holding, ends a dual share structure that had allowed the family's 22% stake to carry 62% of the votes. The family will continue to hold 7.1 million shares, which will give them the same power as other investors in the company.
The chairman of Sotheby's, Michael Sovern, said the group should now be attractive to outside investors as it would have "governance more consistent with the best practices of public companies".
He added: "We also anticipate that the transaction will have an overall positive impact on future earnings per share as we will have significantly reduced the number of shares outstanding."
The voting rights granted to the Taubman family had been blamed for holding back the shares. Rommel Dionisio, an analyst at Wedbush Morgan Securities, told Reuters: "Over the past few years there has been considerable speculation over what the Taubman family would do with their shares, so I think this successfully puts that issue to rest."
Sotheby's was floated on the New York Stock Exchange in 1988. Alfred Taubman paid $38.5m for his stake in Sotheby's in 1983, when he was part of a consortium that paid $138m for the auction house.
Yesterday's deal means that the Taubman family has taken $368m out of the business in the intervening years: $100m through a sale of stock in 1992, $100m in dividends, and $168m from the latest deal. This does not include the 7.1m shares still owned by the family, which were worth just over $100m at yesterday's price.
A New-York based spokesman for Alfred Taubman said the former chief felt the transaction had been good for the company. "He has a great love for Sotheby's," he said, adding that Mr Taubman felt "a bit bittersweet" that he had not been involved in the day-to- day running of the company for some years. He did not believe the family had any immediate plans for the cash.
Sotheby's surprised some analysts by revealing that it had approached the Taubman family with the plan, rather than the other way round. In the past, there has been speculation that the family had been seeking a way out.
In 2002, shortly after he was convicted of conspiring to fix commissions, Alfred Taubman in effect put Sotheby's on the block by appointing Goldman Sachs to find a buyer for his stake. The search came to nothing.
The Taubman family has now agreed not to sell its other shares before September 2007.
To finance the deal, the company has taken out a five-year $200m loan. The Taubmans receive $168m in cash and enter into a one-for-one swap for their remaining 7.1m shares.
The family is in effect receiving $20.82 for each share it owned compared with a market price of $17.43 - a figure remarkably similar to the date Sotheby's was founded, 1744.
Year in the life
When Alfred Taubman was sentenced at the age of 78 to a year in jail for his role in a price-fixing scheme, a New York judge told him he had been motivated by "arrogance and greed".
Taubman, who had made his money through shopping centres across the US, was stunned. He entered a low-security medical prison in Rochester, Minnesota, on August 1 2002 and, after having his sentence reduced for good behaviour, was released on May 15 2003. The conviction for conspiring with rival Christie's to fix commissions also cost Taubman $7.5m in fines and $150m to settle lawsuits with clients in America. He is now writing a book about his experiences.
Aside from his Sotheby's stake, Taubman still owns 30% of Taubman Centers, the New York Stock Exchange shopping centre business that made his name.