February 20, 2015 / 11:20 PM / 4 years ago

UPDATE 1-Marcato pressures Sotheby's to buy back shares, replace CFO

(Adds response from Sotheby’s, Third Point)

Feb 20 (Reuters) - Activist investor Marcato Capital Management LP said auction house Sotheby’s should repurchase $500 million stock immediately and replace its chief financial officer, a week after the company said there will be no return of capital.

Marcato, Sotheby's second-largest shareholder after Daniel Loeb's Third Point LLC, said there was "willful neglect" on the part of both management and the finance committee that lead to poor returns on investments. (1.usa.gov/1EyBgSg)

Sotheby’s reiterated that it will not return any capital to shareholders until a new chief executive has been selected.

The company announced in November that William Ruprecht would step down as chief executive, after activist investors including Daniel Loeb demanded changes.

A Third Point spokeswoman declined to comment on Marcato’s demand. Loeb joined Sotheby’s board last year after waging a proxy contest.

Mick McGuire, Marcato’s founder, was offered a seat on Sotheby’s board, but he refused when the company did not commit to capital allocation, the hedge fund said.

Marcato, which owns 7.35 percent of Sotheby’s as of Dec. 31, said in January 2014 that the company should return $1 billion to shareholders within 12 months. Sotheby’s said it will return $450 million.

The hedge fund said on Friday a new CEO should immediately look to replace Chief Financial Officer Patrick McClymont.

Marcato said McClymont had questioned Marcato’s motives to get seats on Sotheby’s board when he was a financial adviser to Sotheby’s prior to his appointment as CFO.

McClymont had advised Sotheby's to return capital to shareholders who were not activists to persuade them that current board members would serve in their best interests, according to email conversations made public last year. (1.usa.gov/1LmFMr2)

Sotheby’s shares closed 1 percent higher at $44.59 on Friday. (Reporting by Nayan Das in Bengaluru; Editing by Don Sebastian)

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