NEW YORK (TheStreet) - Auction house Sotheby's (BID) said it will add Third Point Capital Management's Dan Loeb and two other directors appointed by the hedge fund to its board of directors. The move may hasten further changes at Sotheby's after the iconic art house unveiled a range of strategic initiatives in early 2014.
The appointment of Loeb and two other directors comes ahead of Sotheby's annual shareholder meeting and creates a standstill between the art-seller and Third Point, which has agitated for changes including cost reductions, capital returns to shareholders and a commitment to providing financing for the company's customers.
In addition to Loeb, Sotheby's will add Olivier Reza and Harry J. Wilson to its board of directors, expanding the board to 15 members."We welcome our newest directors to the Board and look forward to working with them, confident that we share the common goal of delivering the greatest value to Sotheby's clients and shareholders," Sotheby's CEO Bill Ruprecht said in a statement. "We are confident this Board will benefit from the perspective of aligned shareholder voices. We are committed to working closely with Sotheby's leadership team to unlock shareholder value by pursuing a strategy of sound capital allocation and growth while respecting the best of the Company's rich history, tradition and culture," Loeb added in a statement. Other investors came out in support of Loeb's shakeup of Sotheby's, even if their ideas on how to create value for the company diverged. Mick McGuire of Marcato Capital Management said in April the hedge fund will vote for Third Point Capital Management's slate of nominees. Those comments, in addition to other shareholder concerns to go with Third Point's agitation, likely paved the way for Monday's standstill. Marcato took a stake in Sotheby's in the second half of 2013 with the belief that the art dealer had over a billion dollars of excess capital on its balance sheet and wasn't properly managing the company's finances. For instance, McGuire said Sotheby's use of equity capital to fund its lending for art purchases caused the company to earn a return below its cost of capital on those loans. By supporting Loeb's nominees, McGuire said that it would help ensure that Sotheby's didn't slow the pace of change at the company after announcing a range of strategic initiatives in early 2014. In January, Sotheby's said it will pay a $300 million special dividend to shareholders and that its board authorized a $150 million share repurchase program to offset dilution from annual stock rewards to employees.
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