A name like Greg Manning Auctions could give the impression of a business that's, well, small and parochial -- and worse, it would be a false impression, when your auction-house operations are actually spread far across the globe. That must have been on the minds of the company's board of directors when it decided to change the name of the leading collectibles company to Escala Group (NASDAQ:ESCL). Now that sounds impressive and, yes, worldly -- whatever it actually means.
I'm wondering, though, whether we didn't just witness a coup d'etat.
Two years ago, Greg Manning auctioned itself off to Spanish collectibles company Afinsa Bienes Tangibles, the world's largest stamp dealer and the third-largest collectibles player behind Sotheby's (NYSE:BID) and Christie's. In return for its 72% ownership stake in Greg Manning, Afinsa agreed to buy $250 million worth of merchandise over five years, a tally it upped to $1 billion over 10 years. It seems like a good deal on the surface, and thus far it has apparently been working out well for the two. Even though revenues fell in the third quarter, they made up for it in the fourth quarter: Revenues for the full year were up 21% over 2004.
Concurrent with the financial statements for the end of the fiscal year (and the ensuing name change), there was also something of a shakeup in the complexion of management. Founder, CEO, and President Greg Manning seems to have been shuttled out of the building and off to Asia, where he will be responsible primarily for operations in Hong Kong and China. While the Asian markets represent an area of growth that the company previously said it hoped to tap, Escala's press release offered very little in way of explanation for the change in the executive suite.
In Manning's place as president and CEO comes Jose Miguel Herrero, a director since 2003 and formerly a managing partner in a corporate finance company focused on technology. Previously, he served as CEO of an Internet company, LaNetro.
Two board members have also resigned, and in their place a former ambassador and bank executive have been installed. They also seem to have little experience in the way of collectibles: The ambassador has been working as a college professor in Lisbon, Portugal, while the banker was chief executive of a private equity firm based in Madrid, Spain.
It looks as though the old, capable management has literally been sent packing and a new administration, seemingly with ties to Afinsa, has been brought in, though one of the departing directors has also been with Afinsa since 1996.
Enjoy the scenery in Hong Kong, Mr. Manning, since you wouldn't recognize your headquarters anymore anyway. Escala abandoned the bucolic -- and, one would think, cheaper -- New Jersey suburbs for fancy new digs in midtown Manhattan. Apparently, an international collectibles powerhouse with an ethereal new name needs a high-priced "world headquarters" in the middle of the world's finance capital.
The deal that brought Afinsa on board was originally thought to be fraught with risk, though fellow Fool David Meier thought it might be Afinsa selling off large chunks of its holdings. That hasn't been the case: Afinsa's stake still equals nearly 70%, and for most of 2005 it has been making market purchases of the stamp and coin seller's shares.
Since the announcement two days ago, Escala's shares have risen some 4% on higher volume, a suggestion that investors are shrugging off the moves. Yet I'm concerned that the company will not have the same focus it had previously, even if it does have a broader reach. Extra costs, along with potentially too-cozy relationships, may undermine an otherwise sound operation.
Make a bid for further research with these related bits of Foolishness:
- Greg Manning Bids for Higher Profits
- 2 Auctioneers Buy Low, Sell High
- Fear Collects at Greg Manning
- Are Auction Houses on the Block?
Fool contributor Rich Duprey finds nothing "bucolic" about New Jersey traffic jams. He owns shares of Escala but of no other companies mentioned in this article. The Motley Fool has a disclosure policy.
