Sotheby’s Adopts Shareholder Rights Plan Amid Loeb Action

Sotheby’s adopted a shareholder-rights plan to protect itself from hostile takeovers after hedge-fund manager Daniel Loeb increased his stake in the auction house and called on the chief executive officer to resign.

The board adopted the so-called poison pill after the “recent rapid accumulations of significant portions” of outstanding common shares, Sotheby’s said in a statement. The move could make an attempt to take control of the company more costly.

“The rights will not prevent a takeover, but should encourage anyone seeking to acquire the company to negotiate with the board prior to attempting a takeover,” Sotheby’s said.

Loeb said this week he will seek a board seat and has begun an informal search for outside candidates. He said he’s aware of at least two internal candidates he didn’t identify “who warrant serious consideration” to replace William Ruprecht as CEO. Ruprecht also holds the titles of chairman and president.

Loeb also disclosed this week that his firm, Third Point LLC, has raised its stake in Sotheby’s to 9.3 percent. The billionaire activist has been ratcheting up pressure on the New York-based auction house, criticizing its international operations and “deteriorating” competitive position compared with rival Christie’s International Plc, as well as its executive compensation.

Sotheby’s board and management “have attempted to further entrench themselves,” Third Point said in a statement.

“It is clear that today, the chief executive officer and his hand-picked directors have put their job security ahead of shareholders,” the hedge fund company said.

Policy Review

Last month, Sotheby’s said that it’s reviewing “its capital allocation and financial policies” and that Patrick McClymont, an investment banker at Goldman Sachs Group Inc., would replace its chief financial officer of 17 years, William Sheridan.

In 2012, Sotheby’s sales declined 7 percent to $5.4 billion as closely held Christie’s sales increased 10 percent to $6.2 billion. Sotheby’s shares, up 51 percent this year, fell 24 cents to $50.70 at 3:21 p.m. in New York.

Loeb isn’t the only activist with an eye on Sotheby’s. Trian Fund Management LP, the firm run by investor Nelson Peltz, bought 2.07 million Sotheby shares in the three months ended June 30, or about a 3 percent stake, according to a regulatory filing. Marcato Capital Management LLC disclosed a 6.7 percent stake.

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