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Sunday, January 1, 2012

NOORTMAN POSTS A LOSS AFTER FAILING TO HIT SOTHEBY’S TARGETS


Noortman posts a loss after failing to hit Sotheby’s targets
Old Master specialist opens London space and shifts selling strategy to include modern and contemporary

By Charlotte Burns and Gareth Harris. Market, Issue 230, December 2011
Published online: 05 December 2011

There are changes afoot at Dutch Old Master dealer Noortman. The company has recently expanded into London with a new space at Old Bond Street, and is shifting its sales strategy after suffering an $8.3m loss on its inventory.

The details have emerged on the fifth anniversary of the company’s acquisition by Sotheby’s in 2006 for $82m, and the expiry of financial performance ¬targets set as part of the initial ¬purchase. In 2006, Sotheby’s paid $56.5m of the total $82m purchase price in company shares (1,946,849 shares at a rate of $29.01 each). This gave Noort¬man a 3.2% stake in Sotheby’s. It is unclear how much of the stock the gallery now owns because the information is not reported in Sotheby’s Securities and Ex¬change Com¬mission filings.

However, Noortman has not achieved the “minimum level of financial performance”, according to Sotheby’s third-quarter filing, which states that, under the terms of the original deal, “up to 20% of the initial consideration would be transferred back to Sotheby’s” if the dealership failed to reach the agreed objectives. Following the five-year ¬review, the gallery has to transfer 147,352 shares back to Sotheby’s in the fourth quarter of 2011 (7.5% of the original amount).

The $8.3m write-down relates to Sotheby’s reassessment of the gallery’s stock. “It is standard accounting practice. You determine that the assets are not as much as you thought and revalue downward. Sotheby’s is saying ‘We still have these paintings, they are not [worth] as much as we thought, so we are putting a new value on them,’” says Eric Hollowaty, an equity research analyst at Stephens investment bank.

Noortman will sell off a “large collection of lower valued works at various auction houses in the fourth quarter of 2011”, according to the filing. Sotheby’s itself is not selling the bulk of the work. “It’s not all the sort of material we handle, it’s not our brief and it’s not what we do best,” says chief executive Bill Ruprecht.


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