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• Issue #156
• Article

Simon de Pury, head of the Phillips de Pury & Co. auction house, has never been known to give up control even when his back has been up against the wall in the past. Yet in October 2008, the Moscow-based Mercury Group acquired a majority share of Phillips de Pury. How they managed to get the reluctant de Pury to give up control of his firm remains a bit of a mystery.

In early October, the Mercury Group, Russia's largest luxury-retail company, bought a controlling stake in the cash-strapped auctioneer Phillips de Pury & Co. Although the sums involved in the private transaction were not released, various news sources reported that Mercury paid about $60 million for its majority share, of which "around 50%" was to cover Phillips's outstanding debt.

Some of the same news sources reported that Dmitry Filatov, a St. Petersburg-based food-production businessman, sold his 15% stake in Phillips to the Russian retailer in a separately negotiated transaction. Some industry observers think the Russians outplayed de Pury by lining up this additional piece of the business in advance to gain outright control, while de Pury may have miscalculated.

Mercury is run by Leonid Friedland, who has been described as "one of the most powerful men in fashion", and his associate, Leonid Strunin. With annual revenues totaling over $8 billion, the company operates high-end market department stores and shopping centers, including the prestigious TsUM, in Moscow, while offering such labels as Gucci and Prada, plus super luxury items like Rolex watches, and Bentley and Ferrari cars.

As soon as the Russians took over the company, personnel changes started happening, whether or not these were related to the takeover, which is hard to determine. The CFO left; the New York and London heads of the photography departments left; and the company got a new CEO, Bernd Runge, a German media executive who once worked as a Stasi informant, according to an article in the Wall Street Journal (WSJ).

The 48-year-old Runge, who was formerly Vice-President of Condé Nast International, will be based out of the auction house's new London headquarters beginning March 1st.

Simon de Pury will remain chairman for now.

Runge spent the past decade launching more than 20 magazines, including Russian versions of Vogue, Glamour, and GQ. According to the January 26th article in the WSJ, he worked as a paid informant for communist East Germany's spy agency during the 1980s, while he was a student and later a reporter for a news agency in Hungary. The information came from former Stasi archive files in Berlin that were released by the unified German government and widely reported in the German media five years ago. Runge spied on fellow students, anti-communist dissidents in Hungary and Western journalists. He even informed on his sister when she applied to leave East Germany, according to the files.

"I attach absolutely no importance to reports that have been made several years ago regarding Bernd Runge and some activities in the distant past," de Pury said to the WSJ reporter. Runge, through a Phillips spokeswoman, apparently declined to comment.