My Yahoo!Arnault Says Adieu To Auction Business
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| Going, going, gone... |
Arnault, who along with his family owns 48% of LVMH (nyse: LVMH - news - people ) and according to Forbes has a net worth of $7 billion, had created the firm just over a year ago, by merging the slight creaky Phillips (which he bought in 1999 for $97 million) with de Pury & Luxembourg, a Swiss-based art dealer known for its blue-chip clientele.
Since then, Phillips, de Pury & Luxembourg has been overpaying, both to buy whole collections for sale at auction--such as the Berggruen and Smooke collections--and to woo senior specialists from Sotheby's (nyse: BID - news - people ) and Christie's. This strategy cost it £82 million (approximately $118 million) last year. But with a drop in the luxury-goods market--LVMH has made four profit warnings in the last six months--Arnault cannot afford to continue being so indulgent.
Now de Pury and Luxembourg, who already owned 25% of the auction house, have bought a majority stake of 72.5%, thanks to the personal fortune of de Pury's companion, Louise Blouin MacBain, who co-founded Montreal-based Hebdo Mag Group. Hebdo is the world's largest publisher of classified ad-format publications and owner of 296 publications and 62 Web sites. MacBain becomes CEO of the auction house.
"We will continue to implement the vision we shared with LVMH, of creating a boutique-style auction house which focuses on the top end of the market," said De Pury. "The first year was the investment phase, with Phillips repositioning itself in seven or eight categories. We have successfully bought market share and broken artists' records. Now we will continue with the same structure and build on the same team of about 120 staff."
While he confirmed that the firm would still offer guarantees, they will not be "at the same level" as in the past. The most notable example was in November of last year, when Phillips sold the Smooke collection. While this made $86 million, the paintings were thought to carry a guarantee of around $160 million, resulting in a huge loss for the company.
De Pury declined to say when he thought the firm would become profitable, just saying "we are well capitalized and we have no debt on our balance sheet". He said the current advisory board, which includes high-profile names such as Sir Joseph Hotung, Lord Camoys and Gert-Rudolph Flick, would remain, and denied there would be any job losses.
Arnault's retreat is nevertheless a tremendous loss of face for the chairman of LVMH, who was once thinking of buying Sotheby's. This now seems unlikely, as he has probably burnt his fingers enough in the art market. A question mark must also hang over the future ownership of two art publications, the New York-based Art and Auction, and the French Connaissance des Arts, both of which also belong to LVMH. Without an auction house, the raison d'être of Arnault's interest in these magazines has disappeared.
Along with his withdrawal from fine art sales, Arnault has also given up on his struggling Internet investment company, Europ@net, and is seeking to sell the cosmetics chain Sephora and duty-free shopping chain DFS Group.
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