The Abu Dhabi sovereign wealth fund’s reasons for acquiring shares in Sotheby’s

At the beginning of the year, Sotheby's announced a major restructuring. At the same time, the famous New York-based auction house announced that it would be opening new retail sites worldwide, in Hong Kong, Paris and the iconic Breuer Building in New York, next year. However, the slowdown in the luxury goods and art markets and the bouts of financial uncertainty that have tested the stability of the world's stock markets have taken their toll on Sotheby's cash position, and the time has come to inject external capital.

A few days ago, ADQ, Abu Dhabi's sovereign wealth fund, investment company and holding company, signed an agreement with the auction house to acquire a minority stake. The deal is valued at around $1 billion.

French-Moroccan billionaire Patrick Drahi, who bought Sotheby's in 2019 for €3.7 billion, is currently the majority owner of the auction house and will invest additional capital, the amount of which has not been specified. For Drahi, this is a delicate moment. The businessman, head of Altice, has just exited the capital of the historic UK telecommunications group BT. This decision aims to reduce the billionaire's huge debt, estimated at around €60 billion. As for Sotheby's, at the end of last year, its parent company, Bitfair, declared a long-term debt equivalent to 3.5 billion dollars.

But why is Abu Dhabi's sovereign wealth fund, ADQ, coming to the auction house's rescue? The fund, set up in the United Arab Emirates in 2018, first named Abu Dhabi Developmental Holding Company and renamed ADQ in 2020, is strategically diversifying its portfolio with this deal, following a broader strategy of diversification into the cultural sector, energy, utilities, food, agriculture, and healthcare.

Tahnoun ben Zayed Al-Nahyan, the younger brother of Mohammed ben Zayed Al-Nahyan, the Emir of the Emirates and head of the ADQ sovereign wealth fund, is demonstrating his dynamic and aggressive buyout strategy. Last year, although the initiative did not materialise, the fund set its sights on buying the Franco-American investment bank Lazard.

These deals reveal a fear: the end of the petrodollar era and the need to diversify.

Sotheby's should see its presence significantly enhanced in the Middle East, a region that has emerged as a key player in the global art market, offering new opportunities and potential growth.

The financial transaction, currently pending regulatory approval, is expected to be finalized by the end of the year, providing a clear timeline for the next steps.