Loeb Legal Team Says Sothebys Shows “Disdain” In Poison Pill Bid


Activist hedge fund Third Point is suing auction house Sothebys (NYSE:BID) over its adoption of a poison pill provision that would prevent passive investors from purchasing more than 20% of the company.

Third point blocked from holding 20%

Third Point currently owns 9.6% of the firm and is engaged in what is becoming a rather aggressive takeover battle.  Third Point said Sothebys (NYSE:BID) refused to amend the terms of its plan so the hedge fund could boost its stake to 20%, which led to the lawsuit.

Sothebys board expresses “unanimous support” for CEO

Responding to the lawsuit, CNBC’s Scott Wapner reports that Sothebys (NYSE:BID) board expressed “unanimous support” for CEO William Ruprecht, who had become a target of Third Point’s founder Daniel Loeb.   An avid art collector, Loeb was quoted as comparing Ruprecht to “old master painting in desperate need of restoration” as he campaigned to have the auction house’s chief executive replaced.

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In the CNBC report, Sothebys (NYSE:BID)’s board said its poison pill plan “protects existing shareholders,” as the board went on to question the timing of Loeb’s activism “given recent successes.”

Loeb’s legal team responds: Sothebys board shows “disdain for shareholders and accountability”

For its part, Loeb’s legal team said Sothebys (NYSE:BID) move was illegal and issued a statement to ValueWalk from their lawyer, Tariq Mundiya from Willkie Farr & Gallagher LLP: “By adopting a poison pill without any threat of a takeover, the Sothebys board showed its disdain for shareholders and accountability and proved that its goal continues to be entrenchment over the interests of its owners,” the statement said. 

Loeb’s team does not desire to “take control” of Sotheby’s, according to the court document, and claims that when the Sotheby’s board realized they were going to take away lucrative and prestigious board seats to preserve their own benefits and not for any “proper purpose.”

“The terms of the of the poison pill demonstrate that the board has no genuine concern with the takeover attempt,” the complain says.  

In their comments to CNBC, the Sothebys (NYSE:BID) board indicated they were surprised that Loeb had turned down a board position that was offered to him.  Loeb had requested three board seats.  When they turned down Loeb’s request they were reported to have added that Loeb’s proposed directors had “no relevant expertise not already represented on the board of directors,” according to a report in the New York Times.  

Loeb is an activist investor known for taking a position in a stock and then shaking up the board of directors.

Dan Loeb BID lawsuit by scribdvw

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Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com

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