By Siddharth Cavale and Svea Herbst-Bayliss
BOSTON Jan 29 Sotheby's said on
Wednesday it will return $450 million to investors through a
special dividend and a share buyback, but the moves got a
lukewarm reception from investors including two activist hedge
fund managers who have been pressuring the venerable auction
house to make changes.
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 slid, ending 0.27 percent lower at
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 CEO 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
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
"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," CEO 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 pressing for.
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.
"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
Even after Ruprecht said in the fall that the company would
review its business, the pressure from the hedge funds did not
In October, Loeb, known for writing sharply worded letters
to chief executives, called for the departure of Ruprecht, who
rose through the ranks at Sotheby's since joining in 1980 as an
administrator in the rug department.
Instead in late November Tobias Meyer, Sotheby's principal
auctioneer, left the company, sending shock waves through the
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.