NEW YORK • Sotheby's elected Hong Kong businessman and art collector Linus Cheung as its first director from Asia, working with its largest shareholder to add expertise in a key market.
Citing a general slowdown in the art market and other factors, the New York-based auction house on Monday announced the move, along with a loss of US$54.5 million (S$76 million) in the third quarter, compared with a US$17.9 million loss for the same period a year ago.
It had expected the decline, which it attributed in part to the change in the timing of the summer contemporary art sales in London. They took place in the second quarter this year, having been scheduled in the third quarter last year.
Sotheby's also recorded a US$17.2-million pre-tax charge related to the acquisition in January of Art Agency Partners - the art advisory business led by Ms Amy Cappellazzo.
"The third-quarter results were not expected to be good," Mr Tad Smith, Sotheby's president and chief executive, said in a statement. "Underneath our seasonally low level of sales, there were encouraging but tentative indicators that the market could be looking for a rallying point."
Sotheby's shares closed at US$38.43 - up 11.2 per cent - on Monday on the results.
Mr Cheung is the retired CEO of Hong Kong Telecom and a prominent collector of Chinese art, Sotheby's said. He served on the boards of companies including Cathay Pacific Airways, Hong Kong Telecom and Taikang Insurance Group.
Taikang became Sotheby's largest holder in July, with 14 per cent of the shares. The Chinese insurer's chairman and CEO, Mr Chen Dongsheng, is also the founder and president of China Guardian Auctions, one of the country's biggest auction houses.
In September, Sotheby's and Taikang began searching for an independent director and the shareholder agreed not to increase its stake until the person was chosen.
In connection with Mr Cheung's unanimous election to the board, Taikang agreed not to increase its ownership position beyond 15 per cent for a period of three years, subject to certain conditions, Sotheby's said on Monday.
Mr Cheung "hails from a crucial part of our world - Greater China - that will be the foundation of a bright future for Sotheby's", Mr Smith said in his prepared remarks. "His appointment is an important symbol of the relationships that Sotheby's is building in China, especially with the help of our largest shareholder, Taikang."
Analysts said Sotheby's performance was largely a result of market forces outside its control. "We've had a long period of art-price inflation and now, we've started a period of a softer art market, which creates uncertainty," said Mr David Schick, the lead luxury analyst at Consumer Edge Research. He added that Sotheby's "should be given credit for trying to think differently about evolving its business model", by acquiring Art Agency Partners and trying to build private sales.
As part of its effort to think in new ways, Mr Smith said in a conference call with investors on Monday that he would like to see Sotheby's develop customer research so that a bidder who lost out on an item could buy something similar privately from the auction house "within 24 hours".
Sotheby's private sales almost doubled to US$167.9 million, from US$84.9 million last year. It said its quarterly losses were partly offset by an increase in its commission margin, to 16.5 per cent from 15.3 per cent.
At the end of last year, Sotheby's took a loss on the sale of the collection of its disgraced former chairman, Mr A. Alfred Taubman. In the conference call, Sotheby's said that - excluding last year's US$383 million Taubman sale - it was likely to see lower sales in the fourth quarter, a decline consistent with a 26 per cent drop in the overall art market over the past nine months.
Sotheby's, a publicly traded company, releases audited results quarterly. Its main competitors are privately held.
Christie's is owned by French luxury-goods magnate Francois Pinault. Phillips is owned by Russian company Mercury Group.
BLOOMBERG, NYTIMES
