Newspaper article International New York Times

Shareholders to Cast Key Sotheby's Votes ; Meeting Follows Ruling Upholding Poison Pill Defense by Auction House

Newspaper article International New York Times

Shareholders to Cast Key Sotheby's Votes ; Meeting Follows Ruling Upholding Poison Pill Defense by Auction House

Article excerpt

The meeting comes after a court ruling blocked efforts by the hedge fund mogul Daniel S. Loeb to overturn a crucial corporate defense.

Shareholders at Sotheby's annual shareholder meeting Tuesday will cast their votes in what may be a watershed moment in the company's 270-year history and could pave the way for companies to enact tougher defenses against outspoken activist investors pushing for change.

The meeting comes just days after a court ruling in Delaware blocked efforts by the hedge fund mogul Daniel S. Loeb to overturn a crucial corporate defense at the auction house.

In a ruling issued Friday evening, Donald F. Parsons Jr., a vice chancellor of Delaware's Court of Chancery, decided that he would not overturn a so-called poison pill plan that limits Mr. Loeb to no more than 10 percent of Sotheby's shares while letting passive investors hold as much as 20 percent.

Mr. Loeb and his firm, Third Point, have nominated three director candidates, including himself, pitted against the current board at Sotheby's.

Sotheby's poison pill, formally known as a shareholder rights plan, had set off debate within the corporate governance community. While companies have used such defenses for decades, the auction house's version specifically discriminated against activist investors, a move that Third Point had contended was unfair.

But in his ruling, Vice Chancellor Parsons wrote that Mr. Loeb's primary argument -- that the poison pill unfairly impeded his ability to wage his campaign -- was flawed. Sotheby's had presented evidence that the rationale behind its defense could be seen as both rational and proportional to the threat of an activist investor.

And even with his current 10 percent stake, Mr. Loeb has been able to fight the company to a draw. Vice Chancellor Parsons noted that the hedge fund manager had roughly 10 times the number of shares that Sotheby's board now owns, and that his own expert witness had testified that even now, Third Point has a roughly 50- 50 chance of winning the proxy contest.

Mr. Loeb even testified in a deposition that nothing had hurt his ability to reach out to other shareholders. …

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