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By Svea Herbst-Bayliss
May 5 Sotheby's and Daniel Loeb on
Monday ended their long-running battle and agreed to let the
billionaire investor and two of his associates join the auction
The decision was reached only hours before Sotheby's annual
meeting on Tuesday and is seen as a big victory for Loeb's $14.3
billion hedge fund Third Point, the company's biggest
Loeb, a prominent art collector, will join the board which
is growing to 15 members from 12. Harry Wilson, a restructuring
expert who sat on the board of Yahoo Inc with Loeb, and
Olivier Reza, a former investment banker and jewelry expert,
will also join.
For months, each side heaped criticism on the other with
Loeb having complained about the company's high costs and
Sotheby's saying that Loeb and his dissident board nominees
would not bring relevant experience to the boardroom.
The company put in a shareholder rights plan which limited
Loeb's stake to less than 10 percent. Loeb ran a proxy contest
and then challenged the poison pill in court.
Passive investors were permitted to buy up to 20 percent.
Loeb will now be able to raise Third Point's stake to 15
percent from 9.6 percent.
In return, the hedge fund manager, who made history by
challenging the shareholder rights plan in Delaware court, has
withdrawn the lawsuit.
"This is a significant win for Loeb," said Keith Gottfried,
a partner at law firm Alston & Bird who advises companies on
shareholder activism. "Most of these settlements are reached
because of a lack of symmetrical negotiating leverage. Maybe
Sotheby's didn't have the votes."
Some board members had privately said that Loeb's criticisms
were correct, according to emails read at a court hearing. "The
board is too comfortable, too chummy and not doing its job,"
board member Steven Dodge wrote to fellow board member Dennis
Weibling in one email.
Loeb last year compared Sotheby's to "an Old Master painting
in desperate need of restoration," urging cost cuts and
criticizing board members for not owning shares of the company.
Sotheby's Chief Executive Officer Bill Ruprecht, welcomed
the new directors and said all share a common goal of delivering
valued to shareholders.
"This agreement ensures that our focus is on the business
and that we will benefit from five fresh voices and viewpoints,"
The settlement not only ends one of the biggest fights for
board seats this year, but it also paves the way for other
activist investors to take a bigger role in investments they
plan to make, industry experts forecast.
Sotheby's shares climbed 1.8 percent on the news, after it
had fallen 16 percent since the start of the year.
Two investors, who are not permitted to speak about their
investments publicly, said this year's share price decline
underscored that change was necessary at the board level and
that Loeb and his dissident directors should join.
Loeb last sat on a corporate board when he joined Yahoo's
directors and had a hand in selecting Marissa Mayer as the
company's chief executive. Yahoo's share price has climbed more
than 130 percent since Loeb became involved.
(Reporting by Svea Herbst-Baylis and Soham Chatterjee in
Bangalore; editing by G Crosse and Kirti Pandey)