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Sotheby’s may find itself in a new shareholder fight even as its battle with billionaire investor Daniel Loeb and search for a new chief executive officer proved costly in 2014.

The New York-based auction house said today that profit fell 9 percent in 2014 as expenses increased. Net income fell to $117.8 million, or $1.69 a share in the 12 months ended Dec. 31, from $130 million, or $1.90 a share in the same period last year, Sotheby’s said today in a statement.

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One of the harshest battles between an activist investor and a company came to an end on Monday, when Sotheby’s announced it had reached a deal with hedge fund billionaire Dan Loeb.  Third Point, run by Loeb, won a partial victory, securing three board spots and the removal of a poison pill that will allow it to raise its stake in the company to 15%, yet he didn’t manage to force embattled CEO Bill Ruprecht to ease his grip on the company, as he’s manage to hold on to his job while remaining president and chairman of the board of directors.

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Auction houses expect to sell as much as $2.3 billion of art in New York this month as billionaires from China to Brazil compete for trophy works by Claude Monet, Pablo Picasso and Jeff Koons in a surging market.

Two weeks of semiannual sales of Impressionist, modern, postwar and contemporary art at Christie’s, Sotheby’s (BID) and Phillips begin May 6, with online bidding as early as today. Their combined sales target represents a 77 percent increase from estimates for a similar round of auctions a year ago.

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Wednesday, 26 March 2014 10:11

Activist Investor Daniel Loeb Sues Sotheby’s

The billionaire activist investor Daniel Loeb has sued Sotheby’s to force the removal of a poison pill that is preventing his hedge fund from buying more of the auction house’s shares. Loeb, Sotheby’s largest shareholder, launched an attack on the company last year to encourage reforms to the company’s leadership and operations. He also spoke critically of the board’s wasteful executive compensation and waning competitive edge.

Loeb asked a Delaware court to decide whether a board can put up barriers to protect itself from a shareholder seeking board representation. Loeb’s hedge fund, Third Point, holds 9.6% of Sotheby’s, but has been prevented from building a larger stake by the board’s defensive action last October. The one-year poison pill prevents activist investors from accumulating more than 10% of the company’s stock and would make it exorbitantly expensive for Loeb to build his power in the company.

Loeb is asking for the court to overrule the poison pill, saying that his intention is to gain seats on the board and change management policies and that at no time has Third Point had any desire to take control of Sotheby’s.

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Sotheby’s announced that it has named Alexander Rotter and Cheyenne Westphal the new Global Heads of Contemporary Art. Tobias Meyer, the auction house’s former Worldwide Head of Contemporary Art, stepped down at the end of November 2013. Rotter and Westphal have both been with Sotheby’s for many years -- Rotter was behind the recent sale of Andy Warhol’s ‘Silver Car Crash,’ which brought a record $104 million, and Westphal helped launch Sotheby’s new contemporary art galleries in London.

Helena Newman and Simon Shaw will helm the auction house’s department of Impressionist and Modern Art. Newman, who joined Sotheby’s in 1988, was instrumental in the February 2010 auction that netted $263.6 million, a record for a European sale. Shaw, who has worked at Sotheby’s outposts in Stockholm, Paris and London, orchestrated the 2012 sale of Edvard Munch’s ‘The Scream,’ which sold for an historic price of $119.9 million, a record for a modern work of art at auction.

Daniel Loeb, a hedge fund manager who is Sotheby’s largest shareholder, recently commented on the auction house’s need to establish new leadership and more efficient operations.

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Sotheby’s announced that Tobias Meyer, who has served as the auction house’s worldwide head of contemporary art since 1997, will leave the company. Meyer joined Sotheby’s in 1992 as head of the contemporary art department in London. Rumors have swirled that Meyer’s departure was the result of pressure from Sotheby’s investors to establish new leadership and more efficient operations. Hedge fund manager Daniel Loeb, who owns Third Point LLC and is Sotheby’s largest shareholder, has spoken critically of the auction house’s executive compensation and supposedly waning competitive edge.

Meyer said, “I will always cherish my time at Sotheby’s and look forward to the next chapter in my career.I have had over 20 years of the most marvelous experiences at Sotheby’s where I have made many friends and had wonderful times. I wish Sotheby’s the best of luck in the future.”

The auction house said that it has no plans to fill the role of worldwide head of contemporary art. Alex Rotter will continue as the head of contemporary art in the Americas and Cheyenne Westphal as the head of contemporary art in Europe.

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