Sotheby’s Tries to Fend Off Activist Investor With “Poison Pill”

Sotheby’s is adopting a so-called “poison pill” to ward off activist investor Daniel Loeb, who has called for the resignation of the auction house’s current management.

Loeb, whose investment company Third Point is now Sotheby’s largest shareholder with 9.3 percent of its stock, blasted CEO William Ruprecht  in an Oct. 2 letter disclosed last week. He both suggested that Ruprecht step down and offered to join Sotheby’s board himself.

The company’s shareholder rights plan, announced Oct. 5, declares a dividend distribution of one preferred share purchase right on each outstanding share of the common stock—exercisable if someone acquires 10 percent or more of Sotheby’s stock.

It was adopted “in response to the recent rapid accumulations of significant portions of Sotheby’s outstanding common stock,” said a statement from the company filed with the Securities and Exchange Commission. “It is intended to protect Sotheby’s and its shareholders from efforts to obtain control that are inconsistent with the best interests of the Company and its shareholders.”

The provision “will not prevent a takeover, but should encourage anyone seeking to acquire [Sotheby’s] to negotiate with the Board prior to attempting a takeover,” the statement reads.

Loeb blasted the maneuver in a letter released to the media, calling the “poison pill” a “disproportionate response” that is a “relic from the 1980s.” 

“Rather than address our well-documented citations of mismanagement and initiate a constructive dialogue with its largest shareholder, the Board and the CEO have attempted to further entrench themselves,” Loeb said. “It is clear that today, the Chief Executive Officer and his hand-picked directors have put their job security ahead of shareholders.”

The corporate news comes in the wake of Sotheby’s setting an overall sales record for a jewelry auction in Asia.

JCK News Director