Activist Loeb sues Sotheby's board

Activist investor Dan Loeb sued the directors of auction house Sotheby's on Tuesday, aiming to force the removal of poison pill protections that prevent his getting seats on the board. Loeb, Sotheby's largest shareholder since he mounted an attack on the company last year to force reforms, 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 percent of Sotheby's, but has been prevented from building a larger stake by the board's defensive action last October. It instituted a plan for a huge issue of share purchase rights to all shareholders if any one breaches the 10 percent level. The poison pill plan would effectively make it extremely expensive for Loeb to build his power in the company and protect the board. Loeb's suit called it "illegal" and asked the court to overrule it, saying his intention is only to gain seats on the board to change management policies. "At no time has Third Point had any desire to take control of Sotheby's to remedy these problems," the suit said. “By adopting a poison pill without any threat of a takeover, the Sotheby's board showed its disdain for shareholders and accountability and proved that its goal continues to be entrenchment over the interests of its owners," said Loeb's attorney Tariq Mundiya of Willkie Farr & Gallagher LLP. Loeb last year attacked the board for wasteful spending on themselves and a poor competitive position against rival high-end art auctioneer Christies'. In January, the board bowed to some of the pressure, announcing a $300 million special dividend, a $150 million share buyback, restructuring of operations and possible property sales.