Loeb's $14 billion Third Point, Sotheby's biggest investor with a
9.53 percent stake, said on Thursday in a regulatory filing that it
is proposing a slate that includes Loeb, restructuring expert Harry
Wilson and former investment banker Olivier Reza.
This lays the groundwork for a potentially bitter fight between one
of the hedge fund industry's loudest fighters and a 270-year old
company best known for selling hundreds of millions of dollars worth
of paintings at hushed auctions.
For Loeb, an art collector who last year compared Sotheby's to "an
old master painting in desperate need of restoration," this marks
his first proxy contest since scoring a big victory with board seats
at Yahoo in 2012.
In the filing, Loeb acknowledges some of Sotheby's recent positive
steps but criticizes the company for failing to make more
significant changes, singling out its decision last year to put in a
poison pill to protect itself from shareholders like Loeb. "Much
remains to be done to enhance the company's competitive position,"
Sotheby's said in a statement that it is "disappointed that Third
Point has chosen this path."
Ever since activist investor Mick McGuire's Marcato Capital
Management last summer became the first hedge fund to ask the
auction house to overhaul its balance sheet and consider selling its
glass-fronted Manhattan headquarters, the company has become
something of a magnet for hedge funds.
Third Point, which now owns 6.55 million shares, built up its
position over the summer. Both Marcato and Third Point have strong
track records including returns of more than 20 percent last year
while the average hedge fund was up only 9 percent. York Capital
Management and Eton Park Capital Management also rank among the
company's top ten shareholders and beefed up their holdings in the
Four weeks ago Sotheby's said it will return $450 million to
shareholders through stock buybacks and special dividends, as well
as separate its agency and financial services units.
McGuire immediately criticized the plan for not going far enough and
suggested that Sotheby's should return at least $1 billion of
capital to investors within 12 months.
[to top of second column]
Loeb is weighing in now.
Board members have been there too long and it is time for new blood,
including an owner in the boardroom, he said.
The company defended its board saying, "The Board is composed of 12
highly qualified directors, 10 of whom are independent, and three of
whom joined the Board in the past three years."
The company also said that it has tried to reach an agreement with
Loeb, having had six meeting with Third Point and numerous
Loeb currently serves on no corporate boards and first proposed
getting a board seat for himself at Sotheby's last year. Now he may
be taking a page out of the playbook he used to win influence at
Yahoo where he, Harry Wilson and Michael Wolf joined the board in
2012 after reaching a settlement with the company, helped select
Marissa Mayer as CEO and earned $1 billion for Third Point.
While Loeb's words to Sotheby's are pointed, they are far more muted
than in previous battles, suggesting that Loeb, who counts state
pension fund among his clients, may be taking a slightly more
measured path, for now.
For example, Loeb did not renew last year's call for Chief Executive
Officer William Ruprecht to be replaced and may be interested in
trying to work with him now, a person familiar with his thinking
said. Loeb also praised the addition of Domenico De Sole to the
Sotheby's, late on Thursday, reported weaker-than-expected quarterly
profit, hurt by higher operating expenses and increased competition.
The auctioneer reported earnings of $1.30 per share for the fourth
quarter, missing the average analyst estimate of $1.40 per share,
according to Thomson Reuters I/B/E/S.
The company's shares closed down 0.3 percent at $50.37 on Thursday.
They touched a high for the year of $51.16 earlier in the session.
(Reporting by Svea Herbst-Bayliss in
Boston and Siddharth Cavale in Bangalore; Editing by Don Sebastian
and Phil Berlowitz)
[© 2014 Thomson Reuters. All rights
Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.