The Madison Square Garden Company (MSG, Financial) has reportedly let go of its current chief executive officer and president, Mr. Tad Smith. He served his role as a CEO and president for a short period from March 2014. Widely associated and familiar with the strategic plans of all divisions, including the sports, media and MSG Entertainment, Mr. Smith has seen it all. He will complete all his resigning formalities by the end of March 2015. Mr. Smith will now sign up as the CEO and president of Sotheby (BID, Financial).
Mr. Smith speaks
Tad Smith said that he preferred to join the art company due to its trusted brand name and an exceptional team. With the help of his past experiences, he will develop and implement a high growth strategy for Sotheby, Mr. Smith said. He also promised to adopt new technologies with immediate effect along with allocating capital effectively.
Mr. Smith’s predecessor at Sotheby
Mr. William F. Ruprecht is currently serving as the CEO and president of Sotheby. Now that Mr. Tad Smith is joining the company, he will become a board member in addition to the posts of CEO and president. Sotheby, one of the world's biggest brokers of fine and decorative art, had announced of their intentions to ask William F. Ruprecht to step down if a suitable successor was found. Now that an appropriate successor has been found, the company has no qualms in poaching the CEO of Madison Square Garden. The company, which deals with art services had been under the knife to replace the CEO by many of its shareholders. The most prominent shareholder who pressurized the company to have a new CEO was Daniel Loeb hedge fund. Loeb stepped on the board of Sotheby's in 2014.Marcato Capital Management LP, another shareholder instructed the company to repurchase $500 million in stock in February 2015. Marcato was however disappointed with the company’s decision to hold on to the capital returns and not distribute them amongst its shareholders till a new CEO was found. This issue posed another threat to the company. Mr. William served as a CEO and chairman. In his absence, Domenico De Sole, the company's lead independent director will become the new chairman. He is the chairman of Tom Ford International and previously was the head of Gucci (GUCG, Financial).
Looking back at Sotheby’s and MSG’s past
Established in 1744, Sotheby was originally based in U.K., but later shifted its headquarters to New York. Some of the service divisions include private sales, corporate services, it's own picture library, museum services, tax and heritage, cafe, etc. The company's auction sales is reported to have increased 24% to $2.7 billion in 2014. Just last month, the art company acquired 25% share in RM Auctions, the company known for its vintage and classic cars. MSG, on the other hand, was founded in 2010 and hails from the sports and entertainment industry. The net sales for 2014 was reported at $1.56 billion. The company earned a gross profit of $656.21 million. EPS Diluted Before Nonrecurring Items for 2014 was $1.47. In 2013, however MSG's EPS Diluted Before Nonrecurring Items was $1.83.
What is in it for investors?
What may be of investors interest is that the New York-based company has decided not to pay any kind of special dividend given the decision being made. They reasoned it out that no special dividend will be paid as Sotheby is trying to "preserve the flexibility." Investors at world’s fourth oldest auction house may therefore not be very happy with the idea of a new CEO as they wouldn't benefit directly from the change.However, Mr. Smith's promise of creating a sustainable shareholder value in the coming years should give them a reason to rejoice in the longer run.
