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.
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.