By Svea Herbst-Bayliss and Siddharth Cavale
Feb 27 Billionaire hedge fund manager Daniel
Loeb is mounting a proxy fight at Sotheby's with the
goal of winning three board seats after the auction house's
promise to return $450 million to shareholders failed to appease
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
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," Loeb wrote.()
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 fourth quarter.
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.
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
The company also said that it has tried to reach an
agreement with Loeb, having had six meeting with Third Point and
numerous conference calls.
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 board.
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
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