Activist investor Dan Loeb sues to stop auction house’s “poison pill” policy
By Julia Halperin. Web only
Published online: 26 March 2014
The struggle for control at Sotheby’s is heating up. The activist investor Dan Loeb sued the auction house on 25 March in an effort to eliminate its “poison pill” and allow him to buy more shares of the company’s stock. Sotheby’s adopted the defensive corporate tactic last year to limit the hedge fund manager’s influence by preventing his hedge fund Third Point from buying more than 10% of its stock.
Loeb claims in a Delaware business court that the poison pill is “an improper attempt to thwart Third Point’s proxy contest and ensure that the current board members remain firmly entrenched”. Sotheby’s maintains that its plan is both “valid and legal”, according to a statement from the auction house, and notes that “it is similar to those adopted by numerous publicly traded companies facing similar situations”.
The court’s decision will be closely watched in corporate circles, where poison pills are becoming an increasingly common strategy to block a takeover by activist investors. Third Point currently owns 9.6% of Sotheby’s stock.
The lawsuit follows the auction house’s rejection of Loeb’s nominees to its board last month. The auction house said the candidates, which included Loeb himself, lacked “relevant experience” and instead nominated two members of its choosing.