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Sotheby’s Auction House Becomes Target of Loeb’s Third Point

August 27, 2013

Sotheby’s Auctioneer Becomes Target of Loeb’s Third Point

A file photo shows bids being placed on 'Homme au fanion,' a painting by Pablo Picasso, during Sotheby's Impressionist & Modern Art evening sale in New York, on Nov. 2, 2010. Photographer: Tom Starkweather/Bloomberg

Sotheby’s (BID:US), the New York-based art and collectibles auction house, is being targeted by Daniel Loeb’s Third Point LLC activist hedge-fund firm, which amassed a 5.7 percent stake.

Third Point, based in New York, spent $156.7 million on the holding, according to a filing yesterday with the U.S. Securities and Exchange Commission. Loeb, 51, intends to engage Sotheby’s board (BID:US) and management in talks, the regulatory filing shows.

The filing indicates that the discussions may relate to changes in leadership or strategy at the auctioneer, led by Chairman and Chief Executive Officer William Ruprecht. Sotheby’s may have drawn Loeb’s attention as rival Christie’s International Plc revamps itself to fare better in the new digital age, Michael Plummer, former chief operating officer of Christie’s financial services, said in an interview.

“They haven’t radically rejigged their business in the past 10 years,” said Plummer, a principal of Artvest, a New York-based firm that provides investment advice for the art market. “It would appear that these hedge funds have an idea that Sotheby’s could be doing its business differently.”

Sotheby’s generated $768.5 million in revenue (BID:US) last year, the bulk coming from the auction business that sells fine wines, art and gems. It holds a record for a work of art at auction: Last year’s sale of Edvard Munch’s “The Scream” for $119.9 million. Its biggest competitor is Christie’s, the London-based company taken private by billionaire Francois Pinault’s holding company, Artemis SA, in 1998.

‘Long-Lasting Value’

“Sotheby’s board of directors and management team (BID:US) are committed to building long-lasting value for all of Sotheby’s shareholders and we welcome investment in the company,” said Andrew Gully, a spokesman for Sotheby’s.

Loeb and wife Margaret Munzer Loeb are known for collecting postwar and contemporary works as well as feminist pieces, ranking among the world’s top 200 collectors by Art News magazine this year. In 2009, the hedge-fund manager sold a blue-and-pink Jeff Koons egg for $5.5 million. Elissa Doyle, a managing director at Third Point, declined to comment.

Sotheby’s shares climbed (BID:US) 3 percent to $47.21 yesterday in New York. Before today they had gained 49 percent in the past year, more than twice the rate of the Standard & Poor’s 500 Index.

Trian’s Moves

Loeb isn’t the only activist with an eye on Sotheby’s. Trian Fund Management LP, the firm run by activist investor Nelson Peltz, bought 2.07 million Sotheby shares in the three months ended June 30, or about a 3 percent stake, according to a regulatory filing this month. Marcato Capital Management LLC also disclosed a 6.6 percent activist stake accumulated in options and shares.

Activist investors, typically hedge-fund managers, tend to buy at least 5 percent of a company’s stock and flag their intent to seek changes to boost equity returns by disclosing their holding in a 13D filing with the SEC.

Some have broadened into taking over controlling stakes of companies. Paulson & Co., the hedge-fund firm run by billionaire John Paulson, this month agreed to buy Steinway Musical Instruments Inc. (LVB:US) for about $512 million, beating competing offers to gain control of the 160-year-old piano maker.

To contact the reporters on this story: Beth Jinks in New York at bjinks1@bloomberg.net; Katya Kazakina in New York at kkazakina@bloomberg.net

To contact the editor responsible for this story: Jeffrey McCracken at jmccracken3@bloomberg.net


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Companies Mentioned

  • BID
    (Sotheby's)
    • $41.93 USD
    • 2.70
    • 6.44%
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