Hedge fund manager Loeb launches proxy battle at Sotheby's

Thu Feb 27, 2014 4:48pm EST
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By Svea Herbst-Bayliss and Siddharth Cavale

(Reuters) - Billionaire hedge fund manager Daniel Loeb is mounting a proxy fight at Sotheby's (BID.N: Quote) with the goal of winning three board seats after the auction house's promise to return $450 million to shareholders failed to appease activist investors.

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 Olivier Reza.

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.(r.reuters.com/tyb37v)

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.   Continued...

A video display panel is seen outside Sotheby's in London October 4, 2013. REUTERS/Suzanne Plunkett