Shares of Sotheby's (BID) traded up more than 55% on Monday morning after the auction specialist agreed to a $3.7 billion buyout offer. The proposed deal provides a massive premium to recent prices, but is considerably more modest when compared with the levels Sotheby's traded at this time last year.
Sotheby's said before markets opened Monday it had agreed to be acquired by BidFair USA, an entity owned by entrepreneur Patrick Drahi. Terms of the deal call for BidFair to pay $57 in cash for each share of Sotheby's, a premium of 61% to the target's June 14 closing price.
Sotheby's CEO, Tad Smith, in a statement announcing the deal praised Drahi's "long-term view," and said that "this acquisition will provide Sotheby's with the opportunity to accelerate the successful program of growth initiatives of the past several years in a more flexible private environment."
The deal would mark the end to Sotheby's more than 30 years as a publicly traded company. The past few quarters have been unpleasant ones for investors, with the stock down more than 40% over the year prior to the deal announcement due to weak earnings and concern that high-end consumers are going to slow their spending as the economy and stock markets cool.
In fact, while the offer price is a substantial premium to Friday's close, the shares are still down 5% over the past year.
Sotheby's stock price has largely swung between $24 per share and $60 per share throughout this decade, as investors have reacted to perceived strengthening and weakening of demand for high-end goods.
Smith's comments clearly suggest he believes the market's shortsightedness makes it difficult for him to run his business. Time will tell whether he can extract more value as a private company, but it appears investors won't have the opportunity to share in that upside even if it materializes.