Sothebys (NYSE:BID)’s CEO Bill Ruprecht announces plans for spending reductions and $10 million reimbursement to Dan Loeb’s Third Point in the second quarter earnings call. There was a funny exchange on the conference call between an analyst and the CEO regarding the ‘payment to Loeb’, as first reported by David Benoit of WSJ.
“Okay so I hoped I heard it wrong, but I didn’t” – Analyst who asks Sotheby’s to repeat fight costs. $12m-$15m in 2Q including $10M to Loeb.
— Dave Benoit (@DaveCBenoit) May 7, 2014
Below is the ;important
Also see: Third Point’s Loeb, Reza and Wilson Join Sothebys’ BoD
We also project spending reductions of approximately $4 million across other categories of general and administrative expenses. You will see on the P&L line for special charges, in the first quarter, Sothebys (NYSE:BID) incurred $5.7 million of third-party advisory, legal and other professional service fees directly associated with the issues related to shareholder activism and the resulting proxy contest with Third Point. We expect to incur between $12 million and $15 million of additional special charges in the second quarter 2014, which includes up to $10 million for the reimbursement by Sothebys of Third Point expenses in connection with the settlement agreement announced on Monday. For the three months ended March 31, 2014, net interest expense decreased $3.8 million or 31% as a result of the repayment of Sothebys 3-1/8% convertible notes on their maturity in June 2013.
Bill Ruprecht – Sothebys – Chairman, President & CEO
Thank you, Jenny. Good morning, everybody. Thanks for joining us and for your ongoing interest in Sothebys (NYSE:BID). Before I get to the results, let me take a moment to address our agreement with Third Point. As we announced on Monday, the details are publicly filed and available to all of you. As I said when we announced the agreement, I welcome our newest Directors to Board and look forward to working with them, confident that we all share a common goal of delivering great value to Sothebys (NYSE:BID) shareholders and clients. This agreement ensures that our focus is on the business and that we can only benefit from having five fresh voices and viewpoints on our Board. I’d like to particularly thank the team here at Sotheby’s for their unwavering commitment and dedication to clients during this challenging period. We have the most dedicated, professional team in the business. They’re engine that drives this franchise.
George Sutton – Craig-Hallum Capital Group – Analyst
Patrick, could you just repeat the charges you’re taking and the money related to the Third Point expenses? I’m not sure I heard that correctly.
Patrick McClymont – Sothebys – CFO
Sure. So, the first quarter, the number is $5.7 million. In the second quarter, we expect to incur an incremental $12 million to $15 million, of which up to $10 million would be the reimbursement of Third Point expenses.
George Sutton – Craig-Hallum Capital Group – Analyst
Okay. So I had hoped I heard it wrong, but I didn’t. Okay. Relative to your middle-market — new middle-market strategy, can you just help us understand the logic there? This had been a market you had moved away from a few years back, really trying to move to the upper end focus. What’s changed there? As you’re trying to bring expenses down, I’m curious how you make that happen?
Bill Ruprecht – Sothebys – Chairman, President & CEO
Okay. So I had hoped I heard it wrong, but I didn’t. Okay. Relative to your middle-market — new middle-market strategy……………..
