James Murdoch’s private investment company Lupa Systems is to become the new anchor shareholder in Art Basel’s parent company MCH Group as part of a restructuring to help the struggling Swiss events company overcome the damaging financial consequences of the coronavirus crisis.
The New York and Mumbai-based Lupa Systems was founded by the media scion, son of Rupert Murdoch, only last year with the intention of building an investment portfolio of entertainment and media companies—it has already invested in several firms such as Vice Media, Tribeca Enterprises and AWA Studios. Lupa is expected to hold around a third of shares in MCH (between 30%-44%) and has already signed a 15-year relationship agreement with a five-year lock-in, which contains a commitment to keeping MCH Group’s headquarters in Basel during that period, as well as continuing to run Art Basel in Basel.
Murdoch says in a statement:"MCH Group’s long history of innovation for customers, civic commitment to economic and cultural life, and deep investment in its platforms and communities make for a long-term business that can grow, invest, and flourish.” The implications of the new investor for Art Basel are as yet unclear but Murdoch does have art interests—he is a director of the Dia Art Foundation and was formerly a director of Sotheby’s.
Rumours that Rupert Murdoch is involved in the deal have been firmly rebutted by his spokesman who tells The Art Newspaper, "he is not involved in this deal in any way and has never been".
MCH’s board of directors will propose Lupa Systems at an Extraordinary General Meeting (EGM) on 3 August, alongside proposing a capital increase of CHF104.5m (around $100m, achieved via theconversion of a CHF30m loan from the Canton of Basel-Stadt and a cash capital increase of CHF74.5m) and a restructuring of the firm’s debt—the Canton of Basel-Land and the Basler Kantonalbank have extended the repayment of their CHF35m and CHF40m loans by five years.
This set of measures is “urgently needed to overcome the effects of the corona crisis” with the aim of developing “classic exhibition and event formats into future-oriented platforms and communities and to strengthen the market position of MCH Group and Art Basel in Switzerland and internationally," a statement says.
Lupa Systems will underwrite the subscription of the new shares (at CHF10.50 each) and will buy any that are not subscribed by other shareholders, hence its shares will range between 30% and 44%. The discounted share price, which is 25% lower than usual, reflects “the drastic drop in sales this year and the continuing uncertainty of the Covic-19 pandemic,” MCH says.
In large part thanks to the well-documented woes of the watch fair Baselworld and the cancellations of Art Basel in Hong Kong in March and Art Basel in September due to coronavirus, those losses have been considerable, as Bernd Stadlwieser, the chief executive of MCH Group, outlines in the statement: “We started the year 2020 with liquid assets of around CHF140m. Only in this year, the corona crisis will lead to a drop in sales of CHF130m to CHF170m and negative effects on the result in the mid double-digit million range.” The restructuring measures are needed in the near term to shore the company up and help implement its future strategy, Stadlwieser says, “working on new business opportunities and strengthening our long-term competitive position.”
MCH is also going to reduce its board of directors to nine members, three of which will be from Lupa Systems—on 3 August, Murdoch plus Jeff Palker, the managing partner and general counsel of Lupa Systems, and Eleni Lionaki, a partner of Lupa Systems, will be proposed to the board as members.
Lupa Systems could well hold considerable influence over MCH in future—at the EGM on 3 August, it will be proposed that Lupa Systems can buy all remaining shares not already subscribed without actually having to buy the whole company. Plus, the existing restriction on voting rights will be scrapped, so shareholders will be able to flex their full voting power.