Sotheby’s Ends Fight With Third Point as Loeb Joins BoardKatya Kazakina
Sotheby’s agreed to appoint Third Point LLC founder Dan Loeb and two of his candidates to its board of directors, ending a bitter proxy fight between the auction house and its largest shareholder.
Sotheby’s and Loeb’s hedge-fund firm said in a joint statement today that Loeb and his two nominees, Olivier Reza and Harry J. Wilson, are joining the board. Sotheby’s annual shareholder meeting, set for tomorrow, will be rescheduled for later this month. The parties also agreed to cap Third Point’s stake in the company, currently at 9.6 percent, at 15 percent.
The agreement is a win for the fund manager who for months had criticized Sotheby’s Chief Executive Officer William Ruprecht and the company’s executive compensation plan, internal operations and “deteriorating” competitive position.
“This is good for shareholders and we are supportive of the settlement,” David A. Schick, an analyst at Stifel, Nicolaus & Co. who has a buy rating on Sotheby’s, wrote in a report today. “It removes some elements of uncertainty.”
Sotheby’s rose 3.2 percent to $44.80 in New York trading, narrowing its loss this year to 16 percent.
The settlement comes after Loeb’s Third Point on May 3 lost its bid to delay the meeting so a judge could scrutinize the effect of an anti-takeover defense on the fund company’s effort to win board seats.
“Management probably didn’t change their mind over the weekend about how much they would enjoy working with Loeb,” Erik Gordon, a professor at the Ross School of Business at the University of Michigan in Ann Arbor, said in an e-mail.
Sotheby’s directors “probably tallied where they stood with other major investors on the upcoming vote and didn’t like what they saw,” Gordon said. “When you are about to lose, even to someone you have vilified, you take a deep swallow and hold out a hand of reconciliation.”
Delaware Chancery Court Judge Donald Parsons sided with Sotheby’s, saying in his ruling that he turned down Third Point’s request for a temporary injunction because it’s unlikely Loeb will win his argument.
“Sotheby’s effectively capitulated after winning in court,” John Shea, chief executive officer of Proxy Mosaic, a corporate governance and proxy advisory firm, said in a phone interview about the agreement. “That indicates they were worried about losing a proxy contest.”
The ruling was a setback for Loeb’s claims that Sotheby’s directors created the poison pill in a novel effort to hamper the activist investor’s fight for three board seats rather than to prevent a takeover. Third Point has withdrawn its litigation on the rights plan.
“We welcome our newest directors to the board and look forward to working with them, confident that we share the common goal of delivering the greatest value to Sotheby’s clients and shareholders,” Ruprecht said in today’s statement. “This agreement ensures that our focus is on the business and that we will benefit from five fresh voices and viewpoints.”
Loeb, an art collector, said in the statement that “Harry, Olivier and I are delighted to join the Sotheby’s board. As of today we see ourselves not as the Third Point nominees but as Sotheby’s directors, and we expect to work collaboratively with our fellow board members to enhance long-term value on behalf of all shareholders.”
The shareholder meeting will convene tomorrow and then adjourn until later this month, according to the statement.
Loeb, Reza and Wilson will be added in the company’s slate of director nominees for election at the shareholder meeting, according to the statement. With these additions and the previously announced inclusion of new director candidates Jessica Bibliowicz and Kevin C. Conroy, the Sotheby’s slate will expand to 15 members, 13 of whom are independent, according to the statement.
Sotheby’s slate will include John M. Angelo, Domenico De Sole, The Duke of Devonshire, Daniel Meyer, Allen Questrom, Marsha E. Simms, Robert S. Taubman, Diana L. Taylor, Dennis M. Weibling and Ruprecht, Bibliowicz, Conroy, Wilson, Loeb and Reza.
“This is a very good outcome for the shareholders,” said Proxy Mosaic’s Shea, which had recommended to investors to vote Loeb and Reza to the board. “It adds dissident voices to the board without shaking things up too much.”
The settlement ends the proxy fight between Sotheby’s and Third Point. Loeb had contended Sotheby’s decision to trigger the pill if activist investors buy more than 10 percent of its shares, while allowing passive investors to buy as much as 20 percent, was unfair.
The directors of New York-based Sotheby’s had countered that they created the poison pill to keep Loeb or other activist investors from taking over the company and selling it without paying shareholders a premium. Sotheby’s said it will accelerate the termination of its one-year shareholder rights plan.
The agreement is “frustrating,” Shea said. “We could have had this settlement months ago and, frankly, we should have had it months ago. It was on the table and it was rejected.”