Issue #53  2/3/2003
Phillips Auction House Restructures; Buys Out LVMH; Wall Street Journal Article Challenged

As Mark Twain once said, "The rumors of my death are highly exaggerated." Less than two weeks ago, the Wall Street Journal had all but buried the auction firm of Phillips, De Pury & Luxembourg, but the article may have been a bit premature--to say the least. Phillips is indeed restructuring after its high-flying days under the helm of former chairman Bernard Arnault and LVMH, the luxury company that once owned the majority interest. The posh 57th Street, NYC facility is apparently one of the casualties, along with a major slice-and-dice of the corporate staff. Apparently many staff functions will also be outsourced. But the key news, which hit well after the Wall Street Journal article, is that co-CEOs Simon de Pury and Daniella Luxembourg have purchased the remaining 27.5% in the company that they do not already own from LVMH Moët Hennessy-Louis Vuitton. Terms of the purchase were not disclosed.

Interestingly, Simon de Pury and Daniella Luxembourg have decided to give equity to their "key experts and colleagues to further enhance a spirit of partnership and make the company a truly expert-led business."

Major shareholder and former CEO Louise Blouin MacBain is now gone, apparently after the November NYC sales of impressionist and modern art bombed out for Phillips. De Pury was clearly disappointed after these sales. Rumors of a romantic relationship between MacBain and De Pury had been circulating for some time in various press reports, and more recently rumors of that relationship gone bad also made the rounds. Not surprisingly, the Impressionist and Modern Art departments will no longer hold regular scheduled auctions, although the company will conduct auctions of Impressionist and Modern Art on an ad hoc basis.

As part of the new organization, the company announced that Perry Lerner, a partner in Lerner & Squire, LLP, has been retained as Chief Operating Officer of the company to implement many of the changes.

I have been waiting for information from the company as to the source of its current funding for the buy-out of LVMH or its on-going operations, now that MacBain has left. Reportedly De Pury had been seeking but not finding investors. Details will follow in future newsletters.

The photography department staff, including Joshua Holdeman (NYC) and Philippe Garner (London), is so far untouched. Apparently the thrust of the restructuring is to cut the layer of management over the expert groups, perhaps freeing them up to be more productive--something the other houses might have to think about soon.

After an exhilarating October 2002 sale, where Phillips outperformed their NYC rivals in the regular photography sales at Sotheby's, Christie's and Swann's with a 68% sell rate and a substantive $2,181,114 in sales (second only to Christie's, which had many more lots), Phillips was well-positioned to take a preeminent role in this market, especially having added the well-respected and experienced Philippe Garner (formerly of Sotheby's London) to head the photography department (as well as 20th century decorative arts).

Josh Holdeman has told me that his strategy is to keep the photo auctions relatively small but focused on interesting material--both vintage and contemporary. It remains to be seen how the gossip of the financial press will affect the photography auctions, but I suspect that in the end material--as it always does--will win (or lose) out. In other words, if Phillips does get the right images and Holdeman executes his strategy, it will continue to do very well for its consignors (and Phillips itself). With the 57th Street headquarters closing in the next six months, the only question is how much of the high-flying art crowd that the company courted with its extravagant parties and surroundings at the tony uptown digs will continue to show up at Phillips more bohemian Chelsea facility down on 15th Street. That might affect the contemporary side more than the vintage images.

And, apparently Phillips will be a lot more reluctant to pay for the market share that they went after so aggressively under LVMH. Philippe Garner told me, "Broadly Phillips is going through a period of transition--readjusting to the grand vision of Arnault-LVMH where the objective was to buy market share." Now Garner says there is a "new reality" that means a good "business plan" for the company. Translation: Phillips will only compete for business when it makes direct economic sense.

In any case, the Phillips' spring auctions are scheduled for April 24 (Part 1) and April 25 (Part 2).