Marcato Capital Will Vote for Third Point's Sotheby's Slate

NEW YORK (TheStreet) - Mick McGuire of Marcato Capital Management said on Tuesday the hedge fund will vote for Third Point Capital Management's activist slate of directors to Sotheby's (BID) board.

"We are voting for Third Point's directors," McGuire said at the IMN Active-Passive Investor conference in New York. 

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 on Tuesday, 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.

While McGuire said he is focused on Sotheby's bottom line and driving balance sheet and operational efficiency, he noted Third Point appears more interested in revenue growth. If both hedge funds have different views on how to drive better performance at Sotheby's, McGuire said Marcato will support Third Point's board nominees given their ability to continue to engage management.

McGuire said voting in favor of Third Point's directors may alleviate the risk that Sotheby's board views recent corporate actions like a $300 million special dividend, and a replacement of its chief financial officer as a sign the company's work was complete.

"The work starts now," McGuire said. Marcato estimates over $1 billion of cash remains un-utilized on Sotheby's balance sheet.

January Changes

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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