By David Benoit
Marcato Capital Management LP called on Sotheby's to repurchase
$500 million in stock, a week after the auction house said it was
putting a hold on capital returns while it hunts for a next chief
executive.
The move may open up a rift between Marcato, the company's
second-largest shareholder with a 7.4% stake, and fellow activist
Daniel Loeb, who sits on the board, which made the decision to
announce the freeze on capital returns. Mr. Loeb's Third Point LLC
is the largest shareholder with a 9.6% stake.
Andrew Gully, a spokesman for Sotheby's, said the company stands
by its statement last week regarding capital allocation and
declined to comment further. Third Point declined to comment.
Mr. Loeb last year ran a heated proxy contest to gain
representation on the Sotheby's board, a fight he eventually
settled in return for three board seats. While the two activists
weren't partners in the campaign, Marcato stumped for Third Point's
election, telling shareholders that Mr. Loeb would bring a "sense
of urgency and mandate to maximize value."
Marcato's letter to Sotheby's lead independent director Domenico
De Sole shows the activist still wants the company to act with more
urgency.
"We feel a responsibility to other shareholders to express our
deep concern with the governance and executive judgment on matters
of capital allocation and hold this board and management
accountable," Marcato's Mick McGuire wrote in the letter, reviewed
by The Wall Street Journal. CNBC reported on the letter earlier
Friday.
The hedge fund sent the letter after Sotheby's announced last
Friday that it would temporarily stop capital returns to
shareholders to "preserve flexibility as it searches for a new
Chief Executive Officer."
The company later clarified that only its special dividend
wouldn't be paid and it would continue paying its quarterly
dividend as usual. During Mr. Loeb's campaign, Sotheby's announced
a $300 million special dividend and a plan to repurchase $150
million in stock.
Sotheby's announced in November that CEO William Ruprecht would
step down . He plans to leave his post when his successor is
named.
Marcato said on Friday that the new CEO should seek a
replacement for Sotheby's current Chief Financial Officer Patrick
McClymont, who was hired in September 2013. Mr. McClymont, then a
banker at Goldman Sachs Group Inc., earlier that year participated
in an email exchange with Sotheby's executives that questioned
Marcato's motives in its campaigns.
The emails were disclosed in a lawsuit stemming from Mr. Loeb's
Sotheby's campaign.
Separately, Sotheby's on Wednesday announced a 25% stake in RM
Auctions, an auctioneer of collector automobiles. The move signaled
to many in the art world that Mr. Ruprecht, a car aficionado, is
still flexing his muscle at the company.
The deal gives Sotheby's the opportunity to increase its
ownership stake in RM Auctions over time, the company said in a
statement. Sotheby's first auction with RM, which will be renamed
RM Sotheby's, is scheduled for March 14.
Sara Germano contributed to this article.
Write to David Benoit at david.benoit@wsj.com
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