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RAPAPORT... Activist investor Daniel S. Loeb, the chairman of Third Point LLC, is seeking three seats on Sotheby's board of directors, a move that Sotheby's stated was disappointing following extensive behind-the-scenes negotiations. Third Point is Sotheby's largest shareholder with a 9.53 percent stake. In August, Third Point charged that ''Sotheby’s was languishing and lacked the resolve to change despite the obvious need to do so,'' but in its filing today, the hedge fund was much more in repose. Third Point commend Sotheby's for ''taking some action following our filing and believe these expeditious improvements demonstrate the benefits of engaging with shareholders,'' according to the statement. But Third Point added that ''much remains to be done'' to enhance Sotheby's position, compete and boost shareholder value. Third Point added that it was convinced the current board of Sotheby's will benefit greatly from new perspectives and different expertise to move the company forward. With that, Third Point nominated its founder, Loeb, Harry J. Wilson, who is the CEO of corporate turnaround firm MAEVA Group LLC and Olivier Reza, the lead designer and head of the House of Alexandre Reza. Third Point welcomed Sotheby's effort to value its London and New York City headquarters for possible sale, but called the move long overdue. Shareholders will benefit from having an ''owner’s perspective'' in the boardroom moving forward, according to its statement. ''The board’s refusal to fully embrace its shareholders’ desire for change was revealed by its adoption of a poison pill in October. We believe the pill has been put into place solely to entrench the current board and is wrongful. As a response to shareholder demands for increased transparency and accountability, the pill demonstrated that this board’s paramount interest is in ensuring its members are protected rather than maximizing value by considering shareholders’ (evidently valid) suggestions for improvement. No action could have revealed more clearly the need for new blood and fresh views in the boardroom at this critical inflection point for Sotheby’s,'' according to Third Point. Sotheby's faces a challenged operational structure, cultural malaise and lack of experience in corporate restructuring, Third Point contended so it will file a proxy statement with the Securities and Exchange Commission (SEC) to solicit stockholders. In response, Sotheby's contended that its board and senior management had engaged in extensive discussions with Third Point over the past few months in an effort to avoid this very proxy battle. ''As part of these discussions, Sotheby’s offered to appoint Daniel S. Loeb to the Sotheby’s board of directors, where he would also serve on three committees – the nominating and governance committee, the audit committee and the finance committee – and proposed customary standstill arrangements.'' The board called Third Point's actions unfortunate since the auction house delivered record results in 2013, a $300 million special dividend payable to shareholders next month and a commitment for disciplined investment and ongoing capital return. Additionally, the board stated that it had proactively shared non-public information with Third Point and had considered Loeb's views in developing Sotheby's capital allocation and financial policy plan. Sotheby's believes its planned capital and financial policy, together with actions taken to increase competitiveness and bring complementary expertise to the board and the leadership team, best position Sotheby’s to build value for its clients and shareholders now and in the future, according to the board. Domenico De Sole, Sotheby’s lead independent director, said, “Sotheby’s is strongly positioned today, with a strategy and executive leadership team led by Bill Ruprecht that has the full confidence of the board. This team and this strategy are delivering exceptional results for Sotheby’s clients and value to Sotheby’s shareholders. The strength of the company is reflected in Sotheby’s stock price, which remains near historic highs and has exceeded the S&P Midcap index over the one, five- and 10-year periods.” Sotheby's board includes 12 directors, 10 of whom are independent and three of whom joined in the past three years. While the current board's nominating committee will consider the Third Point nominations ''in due course,'' it will present its recommended slate of director nominees in Sotheby’s definitive proxy statement and other materials in preparation for its annual shareholders meeting.
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