Top hedge fund in bid to shape up Sotheby's

Wed Sep 11, 2013 6:14pm EDT
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By Svea Herbst-Bayliss

BOSTON (Reuters) - Hedge fund manager Mick McGuire is not an art collector and has never felt the thrill of bidding in a Sotheby's (BID.N: Quote) auction, where adrenaline spikes with each multimillion-dollar sale of a Cezanne, Rothko or Picasso.

Still, he has ideas on how the 269-year-old auction house might do better for shareholders, and since June has built up a 7 percent stake to allow him to take some of his proposals to management.

A former partner at William Ackman's Pershing Square Capital Management, McGuire is now running Marcato Capital Management, one of the country's hottest hedge funds. The Harvard MBA graduate is relying on his expertise in analyzing balance sheets in making his approach for Sotheby's, which attracts collectors from all over the world.

Selling Sotheby's glass-front world headquarters on Manhattan's upper East Side is just one possibility, and the company's small lending business might rely more on debt than cash, according to people familiar with McGuire's ideas but not authorized to speak publicly.

On Wednesday, Sotheby's signaled it understands the hedge fund's concerns, saying it will review financial strategies, leaving the door open to raising its dividend and taking on debt.

"Each of these options presents possible advantages and disadvantages; all are complex," Sotheby's chairman and chief executive Bill Ruprecht said in a statement. "We are determined to fully exploring every avenue and we are committed to pursuing return of capital alternatives," he said without mentioning Marcato Capital Management or any other shareholder by name.

When McGuire's Marcato Capital Management started the process of buying Sotheby's shares this summer, it marked the 37-year-old manager's fifth activist campaign in less than three years of running his firm.

McGuire notified regulators and the company of his plans with a 13-D filing in June. He was soon joined by others.   Continued...

Staff members chat during Sotheby's preview in Hong Kong April 2, 2013. REUTERS/Bobby Yip