Auction house empire goes under hammer

For more than two and a half centuries, Sotheby's has been in the business of auctioning the world's finest treasures to the rich and the acquisitive. But yesterday, it announced a sale of quite a different kind. The company, tarnished by a recent price-fixing scandal, is itself on the block.

All at once, the future of one of the world's most enduring brands has been thrown into the air. The move, triggered by the decision of its principal stockholder and former chairman, Alfred Taubman, to sell all his shares, is certain to unleash a titanic battle for control of the company.

It could be that a tycoon will stride in to seize the auction house. Christie's, its main rival, has since 1998 been in the grasp of the French luxury-goods titan François Pinault, who controls Gucci. Bernard Arnault, the man who holds the luxury group LVMH until recently had a controlling stake in Phillips, which continues to occupy third place in the auctions market.

But another scenario emerges. Could eBay, the highly profitable internet auction site, find the funds to take control of the Sotheby's brand? Such a transaction would surely shake the once-stuffy auction world to its core. That would be the day when bidding with a clickable mouse would become the new standard instead of waving with an old-fashioned paddle.

Sotheby's Holdings, which is listed both on the London and New York stock exchanges, said yesterday that it was looking either to sell the company or find a merger partner. Either way, the time of Mr Taubman, who bought his stake in the business nearly 20 years ago, is over. That, in itself, is not surprising, given his current predicament.

In April, Mr Taubman was convicted as the main instigator in a price-fixing scam that first exploded into the open in January 2000 – just weeks after Mr Taubman and his then CEO at Sotheby's had welcomed guests to their newly refurbished New York headquarters on the Upper East Side.

While he has appealed his conviction, Mr Taubman is due to show up for a prison term of a year and a day on 1 August. He was also fined $7.5m. However, his retreat from Sotheby's allows him to sell his 62.9 per cent stake in the company. It's shares rose 1 per cent on the news in New York to $14.15 each in morning trading.

The scandal, which centred on a deal struck by Sotheby's with Christie's to set the commission charged to sellers over a period from 1993 to 1999, has cast a cloud over Sotheby's that will not lift. Christie's won immunity from criminal prosecution by co-operating with the US Justice Department and handing over a trove of papers to the prosecution.

It is a factor that any would-be buyer or merger partner will have to seriously consider. While the case in the US is now formally closed – notwithstanding Mr Taubman's appeal – and all civil claims have been settled, the European Commission in Brussels recently announced its own investigation into the alleged collusion.

Harnessing eBay, which gives a forum to internet denizens to trade everything from pornography to granny's old china, to the house of Sotheby's may seem far-fetched. Yet the two companies are already linked. This summer, they are to launch a joint-venture, auctioning fine art on internet.

Sotheby's said it had done a deal with Mr Taubman to co-operate for 90 days in trying to seek the best – and highest-paying – merger partner or buyer. After that Mr Taubman, who made his fortune building luxury shopping malls in the American Midwest, will be free to sell his shares to whomever he chooses.