Sotheby's Fires Back At Loeb

Apr 10 2014 | 10:33am ET

Auction house Sotheby's has fired a 55-slide salvo in its battle with hedge fund manager Daniel Loeb.

Loeb, whose Third Point is Sotheby's largest investor with a 9.6% stake, has been trying to force his way onto the auction house's board.

In a regulatory filing on Tuesday, Sotheby's submitted a slide deck touting its recent accomplishments and arguing Loeb's nominees would add "no incremental, relevant skills, experience or expertise" to the company's board.

Sotheby's also suggested Loeb and his board nominees “would be advocates only for Mr. Loeb's interests rather than those of ALL [emphasis Sotheby's] shareholders,” based on his "behavior with Sotheby's and the fact that he has not articulated any reason for change,” “His history as a short-time board member at other companies” and “the self-interested transaction he executed to sell shares back to Yahoo!"

The auction house marshals 2013 financial performance figures—including consolidated sales of $6.3 billion, aggregate auction sales of $5.1 billion and revenues of $854 million representing growth of 11.1%—in defense of the status quo and states baldly that “Sotheby’s has the right board and leadership to deliver shareholder value now and into the future.”

Loeb, an avid art collector, started this battle in 2013 with a letter to Sotheby's CEO William Ruprecht, blasting the auction house's "lack of leadership and strategic vision at its highest levels" and calling for Ruprecht to step down.

"Sotheby's is like an old master painting in desperate need of restoration," Loeb wrote. "As with any important restoration, Sotheby's must bring in the right technicians," he said, starting with himself, several other new directors and a new CEO.

Loeb criticized Sotheby's "chronically weak operating margins and deteriorating competitive position relative to Christie's" and what he called "dysfunctional division and a fractured culture."

"It is apparent to us from our meeting that you do not fully grasp the central importance of contemporary and modern art to the company's growth strategy, which is highly problematic since these are the categories expanding most rapidly among new investors," Loeb wrote to Ruprecht.

The auction house directly addresses this last point in the slide deck, saying its sales of contemporary art have increased 528% over the last 10 years with total sales at the November 2013 Evening Sale hitting roughly $381 million, “the highest ever in company history.”

Last month, Loeb sued Sotheby's to remove poison pill restrictions that block the hedge fund from acquiring up to 20% of the auction house's stock.

Sotheby's annual meeting is on May 6.


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