Sotheby's adopts 'poison pill' after Loeb raises stake

Fri Oct 4, 2013 6:51pm EDT
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By Katya Wachtel

NEW YORK (Reuters) - Auction house Sotheby's (BID.N: Quote) said Friday it adopted a "poison pill" two days after activist investor Daniel Loeb's Third Point hedge fund called for a management shake-up and increased its stake in the company.

Loeb's roughly $13 billion fund wants to replace Sotheby's leadership for what it sees as weak financial results and loss of ground to rival Christie's.

Sotheby's and its CEO and Chairman William Ruprecht are fighting back, pointing to a rising stock price, blockbuster sales such as last year's $120 million auction of Edvard Munch's "The Scream, and its recent undertaking of a review of its financial strategies

The shareholder rights plan - better known as a poison pill - will be triggered if any one investor, with exceptions, buys more than 10 percent of Sotheby's common shares.

"Poison pills" are a strategy to stop hostile attempts to take over or increase control of a company by forcibly diluting the holdings of certain investors if they exceed a given threshold.

"It is intended to protect Sotheby's and its shareholders from efforts to obtain control that are inconsistent with the best interests of the company and its shareholders," the company said in a statement.

No shareholder currently owns more than 10 percent of Sotheby's. Third Point, its largest shareholder, holds a 9.3 percent stake. Mick McGuire's Marcato Capital Management holds a roughly 7 percent stake in the company. Nelson Peltz's Trian Partners also held a 3 percent stake at the end of the second quarter.

On Friday Third Point said it was "disappointed" that the Sotheby's board had "trotted out the poison pill" in response to the concerns outlined in its October 2 letter. Third Point, which has criticized the company for failing to innovate, called the provision "a relic from the 1980s."   Continued...

Two men chat in front of a polka dot covered Sotheby's signage, part of an installation by Japanese artist Yayoi Kusama, at Sotheby's newly opened gallery in Hong Kong May 18, 2012. REUTERS/Bobby Yip