SBC Warburg confirms bidding for Christie's

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The Independent Online
SBC Warburg Dillon Read, the merchant bank, yesterday confirmed it had approached Christie's about making a bid for the auction house on behalf of a group of anonymous private investors. As Peter Thal Larsen reports, the move would give Christie's the financial muscle offer guarantees to its customers.

SBC Warburg met Christie's advisers for the first time yesterday, after Christie's' board decided on Sunday evening to proceed with the talks.

The bank is believed to have tabled a tentative offer of 300p a share, valuing Christie's at about pounds 500m. However, this is understood to be an initial offer which may be subsequently raised. Christie's shares, which had risen sharply last week, fell 12p to 288p.

However, SBC Warburg last night emphasised that it was acting on behalf of a consortium of private investors rather than itself. Observers had earlier speculated that the bank might be considering a strategic move into the auction house business.

SBC Warburg said it would only proceed with the offer if it had the backing of Christie's board and had completed the necessary due diligence. The identity of the private investors will remain a secret until a final offer is agreed.

The bank is also believed to have guaranteed to retain Christie's existing management and the structure of its board if it consents to a bid.

Last night, Christie's appointed Merrill Lynch, the investment bank, as its joint stockbroker. Until yesterday, SBC Warburg had acted as sole broker to Christie's, but its involvement in the bid raised a potential conflict of interest. Merrill Lynch will work alongside Hambros, Christie's existing adviser.

A week ago, Christie's revealed that it had received a bid approach which it had rejected as too low. Two days later, however, the company said it was considering a modified offer. SBC Warburg is understood to have made both offers. No other bidders are believed to be involved.

If successful, the bid will give Christie's the financial clout to win new business by offering financial guarantees to its clients. Customers are increasingly demanding that auction houses underwrite the proceeds of the auction.

Until recently, however, auction houses have lacked the financial muscle to offer those guarantees. Christie's main rival Sotheby's recently suffered a major loss when an auction it had agreed to underwrite failed to raise the necessary amount.

The success of the offer depends heavily on the support of Joe Lewis, the Bahamas-based British billionaire who owns 29.6 per cent of Christie's. He is understood to have agreed to swap his stake for equity in the new company. He will also help to underwrite auctions by putting up some of the necessary risk capital.