Wednesday - 30 July 2014

Sotheby’s board prepare for May 6 showdown with Loeb

25 April 2014Written by Ivan Macquisten

Sotheby’s are preparing for a crunch vote at the May 6 annual shareholder meeting when they hope to see off a bid by investor Daniel Loeb to join the board.

In a special investor update just published on their website, the board hit back at Mr Loeb's claims that the directors are overpaid and underperforming.

The 16-page presentation, in which the board say they are setting the record straight, sets out a raft of figures showing how the company has driven sales growth over the past decade, developed its digital strategy, brand expansion and loan portfolio, and chased opportunities across the globe.

The directors also caution that "not all market share is good market share", a direct response to Mr Loeb's belief that the auction house's recent performance is cast in a poor light when compared with rivals Christie's. "Management has taken a deliberate and rational approach to pursuing market share; not all share is good share, particularly if the price to Sotheby's is a lower than acceptable margin" - a reference to deals offered to secure trophy consignments that can be so preferential to vendors that the auctioneers can actually lose money on the sale.

The directors turn the tables on Mr Loeb and his company Third Point, who own just under 10% of Sotheby's stock, saying that not only does his claim that the board lack fresh perspective not stand up to scrutiny - five new directors have been appointed since 2011 - but that it has widespread relevant expertise that Mr Loeb himself and his nominees lack.

Erratic Behaviour

And they add that Third Point "offers no plan to create value" for Sotheby's shareholders and that Mr Loeb's "erratic and aggressive behaviour suggest he would be a disruptive force" on the board.

Sotheby's followed up the briefing with an early announcement of results for the first quarter of 2014 which reports a 40% rise in net auction sales to $730m accompanied by an 81% improvement in net losses for the period (the first quarter is traditionally loss making because of the seasonal nature of sales).

Sotheby's expect to confirm official figures the day after the annual shareholders' meeting and have appealed directly to shareholders in a letter to vote for Sotheby's director nominees rather than Third Point's, urging those not attending the meeting to vote by proxy.

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