Dan Loeb Wages Proxy War: Letter To BID (excerpts from SEC doc below)


The Company’s Board of Directors currently comprises one class of directors who are elected annually at each year’s annual meeting of the Company’s stockholders and serve until the next annual meeting following their election or until their successors have been elected and qualified. At the Annual Meeting, we expect that twelve directors are to be elected to the Board of Directors to hold office until the Company’s 2015 annual meeting of stockholders or their successors have been elected and qualified.

Dan Loeb Wages Proxy War: Letter To BID

We are currently seeking your proxy to vote for the election to the Board of Directors of three individuals – Mr. Daniel S. Loeb, Mr. Harry J. Wilson and Mr. Olivier Reza. We are also seeking your proxy to vote for the election of the candidates who have been nominated by the Company other than  and .

For information concerning voting procedures at the Annual Meeting, see “Voting and Proxy Procedures.”

Background of this solicitation

Third Point is a registered investment adviser headquartered in New York with over $14 billion under management. Founded in 1995, Third Point follows an event-driven, value-based approach to investing globally across the capital structure. Third Point’s investment framework identifies mispriced securities and corresponding catalysts that it believes will unlock the company’s latent value.

The Third Point Entities began building their current position in shares of Common Stock in February 2013 and currently own an aggregate of 6,650,000 shares, representing approximately 9.62% of the Common Stock outstanding. We believe that the Third Point Entities collectively are the largest stockholder of the Company.

Third Point and Loeb filed a Schedule 13D

Third Point initially acquired the shares of Common Stock in the Company for investment purposes. On August 26, 2013, Third Point and Mr. Loeb filed a Schedule 13D disclosing that, as of such date, they beneficially owned 5.7% of the Common Stock outstanding, based on the total number of shares of Common Stock outstanding as reported by the Company as of July 31, 2013.

On October 2, 2013, Mr. Loeb sent a letter to Mr. William F. Ruprecht, Chairman, President and Chief Executive Officer of the Company, expressing concerns about the Company’s operating margins and competitive position relative to Christie’s. Mr. Loeb also highlighted the Company management’s lack of alignment with stockholder interests, noting the Third Point Entities’ stake at the time was nearly ten times the number of fully-vested shares held by the Company’s directors and executive officers. Mr. Loeb offered to “join the Board immediately and to help recruit several new directors who have experience increasing shareholder value, share a passion for art, understand technology and luxury brands, or have operated top-performing sales organizations.”

On October 3, 2013, the Company announced the adoption of a shareholder rights plan (commonly referred to as a “poison pill”) in response to the “recent rapid accumulations of significant portions of Sotheby’s outstanding common stock.”

Between October 2013 and February 2014, representatives of the Company and Third Point held a number of in-person and telephonic meetings. Among other things, they discussed Third Point’s ideas about how to increase stockholder value. The Company also shared certain non-public information under the terms of a standard confidentiality agreement. During these discussions, the Company offered to appoint Mr. Loeb to the Board of Directors, which we believe represented both an acknowledgment of Mr. Loeb’s contributions to improving the Company’s value for stockholders over the past six months and their determination that he would be a constructive addition to the Board.

While we welcomed the Company’s endorsement of Mr. Loeb as an appropriate Board member, based on Third Point’s experience a sole voice representing stockholders’ interests in the boardroom is insufficient to bring about necessary change at the Company. Based on this belief, Third Point consistently adhered to a request for multiple board seats. The Company was always well aware of Third Point’s insistence on multiple seats, and so its offer of a single seat was not, in our opinion, a serious attempt to forge a settlement that would avoid a proxy contest.

On January 29, 2014, the Company announced both a $300 million special dividend payable to stockholders in March and the authorization of a $150 million share repurchase program, with approximately $25 million of shares scheduled for repurchase by the end of 2014. The announcement also stated that the Company intended to return excess capital to stockholders on an annual basis. The Company further noted that it would consider additional debt financing and evaluate its real estate holdings in London and New York. Finally, the Company announced that it would separate capital structure and financial policies for the Agency (Auction and Private Sales) business and Financial Services business.

On February 27, 2014, Third Point Offshore Master Fund L.P., a Third Point Entity that is a record holder of Common Stock, delivered to the Company formal notice of its nomination of the Third Point Nominees for election to the Board at the Annual Meeting.

Reasons for this Solicitation

Although we commend the Company for taking some action following our initial Schedule 13D filing, we believe there remains much to be done to enhance the Company’s competitive position, refocus its strategy, and boost stockholder value. As Sotheby’s largest stockholder, we remain firm in our conviction that the Board will benefit greatly from new perspectives and different expertise to move the Company forward. Therefore, we are nominating the Third Point Nominees to the Board.

We believe that the Company’s improvements since our initial Schedule 13D filing, most notably in certain capital allocation practices and the evaluation of the Company’s real estate holdings in London and New York, make the case that the Company and all stockholders will continue to benefit from having an owner’s perspective in the boardroom. While Third Point and Mr. Loeb currently beneficially own almost 10% of the Company’s Common Stock, the Company’s nominees for the Board of Directors, as disclosed in the Company’s Preliminary Proxy Statement for the Annual Meeting filed with the Securities and Exchange Commission (the “SEC”) on March 13, 2014 (the “2014 Preliminary Proxy Statement”), collectively hold less than 1%, with only two of the Company’s nominees to the Board holding above 0.01% of the shares outstanding. We believe that the Board’s refusal to fully embrace its stockholders’ 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 the Company’s nominees for the Board and is wrongful. As a response to stockholder demands for increased transparency and accountability, the adoption of the pill, in our opinion, demonstrated that the current Board’s paramount interest is in ensuring its members and the Company’s nominees are protected rather than maximizing stockholder value by considering stockholders’ (evidently valid) suggestions for improvement. In our view, no action could have revealed more clearly the need for new blood and fresh views in the boardroom at this critical inflection point for the Company.

We also believe the Company’s directors lack the fresh perspective necessary to overhaul the Company’s challenged operational structure and cure its cultural malaise. Institutional Shareholder Services recently released

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