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 The announcement comes four months after 270-year old Sotheby's
pledged in September to review how it spends its money after Richard
McGuire's Marcato Capital Mangement and Daniel Loeb's Third Point
took big stakes over the summer.
Marcato Capital Management said the steps do not go far enough. Loeb
declined to comment.
Sotheby's shares jumped in pre-market trading on the investor
friendly moves, then lost all gains to trade virtually unchanged at
$48.91.
Loeb, whose fund is the biggest investor in Sotheby's with a 9.3
percent stake, has been pressuring the company since early October
to remove its chief executive officer and become more competitive
with rival Christie's. In a letter to chief executive William
Ruprecht, Loeb called the auction house "an old master painting in
desperate need of restoration."
New York-based Sotheby's said it would pay shareholders a $300
million special dividend in March and buy back stock worth $150
million under a new share repurchase program.
Sotheby's will also separate its capital structures and financial
policies for the company's two main businesses: Agency, which
involves auction and private sales, and Financial Services.
"The message we are delivering is clear — we are returning
meaningful capital to our shareholders now and in the future and
establishing a framework that puts Sotheby's in the strongest
position to compete and win in this marketplace," Sotheby's Chief
Executive Officer Bill Ruprecht said in a statement.
The auction house is also considering options for its real estate
holdings in New York and London, something McGuire's Marcato Capital
Management had been pressuring it to consider.
But Marcato, which owns 6.6 percent of Sotheby's and has been
quietly pushing the company to make balance sheet changes for six
months, thinks Sotheby's should return at least twice as much to
shareholders.
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"Sotheby's can and should return a total of $1 billion of capital to
shareholders within 12 months," the hedge fund said, adding that
Sotheby's can afford this sum and still maintain more than enough
liquidity to meet long-term strategic objectives.
Even after Ruprecht said in the fall that the company would review
its business, the pressure from the hedge funds did not let up.
In October, Loeb, known for writing sharply worded letters to chief
executives, called on Ruprecht, who rose through the ranks at
Sotheby's since joining in 1980 as an administrator in the rug
department, to leave.
Ruprecht is still there. Instead in late November Tobias Meyer,
Sotheby's principal auctioneer, left the company, sending shock
waves through the art world.
While Loeb has focused more on management and the company's
competitive position, McGuire has asked for other things including
that the company sell off its glass-front world headquarters on the
Upper East Side in New York and change how it finances art
purchases, relying more on debt than cash.
Loeb's and McGuire's funds rank among the industry's best performers
last year, each chalking up gains of more than 20 percent while the
average hedge fund gained 9 percent.
(Reporting by Svea Herbst-Bayliss in
Boston and Siddharth Cavale in Bangalore; editing by Kirti Pandey,
Phil Berlowitz and David Gregorio)
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