A fourth Sotheby’s shareholder, Phillip Stevens, is suing the auction house in an attempt to halt its sale to the French-Israeli media and telecom entrepreneur Patrick Drahi in a deal worth $3.7bn.
Stevens filed his lawsuit in a New York court on 1 August, joining Michael Kent, Eli Goffmna and Shiva Stein, who all say the information Sotheby’s filed to the Securities and Exchange Commission about its projected cash flow and other aspects of its finances is inadequate. In each of the cases, the shareholders are are seeking to block the sale to Drahi’s company BidFair USA, at least until there are further disclosures that they say will allow for an informed decision on the transaction.
On 12 July, Sotheby’s filed a preliminary proxy statement to start the shareholder voting process—more than 50% need to approve the sale.
According to the filing, Drahi was among nine parties interested in a potential merger with Sotheby’s. Media reports have named the art collectors Ken Griffin, Steve Cohen and Henry Kravis as being connected with possible bids. Alexander Klabin, a low-profile investor who co-manages the New York hedge fund Senator Investment Group, is also among those who have been approached to back a competing offer, according to the New York Post.
In its second quarter financial report, released last week, Sotheby’s described the lawsuits brought by its shareholders as “routine” in the US. “We believe that any claim that the preliminary proxy statement is inaccurate or misleading in any way is without merit, and we will vigorously defend against any assertions in these or in any similar actions that may be filed against Sotheby’s,” the firm said.
According to the financial report, both parties have the right to terminate the agreement if it is not completed before 13 December. Should Sotheby’s accept a “superior proposal agreement” before then, it would need to pay BidFair USA $110.9m, plus up to $4m of expenses. Should BidFair USA terminate the deal due to a lack of debt financing, it would need to pay Sotheby’s a $221.7m fee. Drahi has secured financing from Next Alt, one of his personal holding companies, and BNP Paribas.
In the report, Sotheby’s president and chief executive officer, Tad Smith, described the proposed acquisition as “on track”. Shareholders are due to receive $57 per share of Sotheby’s common stock in a deal that will take the auction house private after 31 years of public trading on the New York Stock Exchange.