UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant x Filed by a Party other than the Registrant ¨
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| ¨ | Preliminary proxy statement | |
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| ¨ | Definitive Proxy Statement | |
| x | Definitive Additional Materials | |
| ¨ | Soliciting Material Pursuant to § 240.14a-12 | |
SOTHEBY’S
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than Registrant)
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FOR IMMEDIATE RELEASE
Sotheby’s Issues Presentation to Set the Record Straight
Presents the Facts in Response to Third Point’s Recent Misleading Claims
NEW YORK, 17 April 2014 – Sotheby’s (NYSE: BID) today announced that it has issued a presentation in response to Third Point’s recent misleading claims regarding the Company. The presentation is available on the Investor Relations section of Sotheby’s website at http://investor.shareholder.com/bid.
Highlights of the presentation include:
| • | Sotheby’s has consistently delivered strong, long-term performance and is executing a clear strategy to drive continued growth and profitability; |
| • | Sotheby’s maintains a strong leadership position within the art market and continues to invest in areas exhibiting substantial growth and potential for attractive returns; |
| • | Sotheby’s Board and management remain keenly focused on expense management and have effectively managed the capital needs of a growing and cyclical business with prudent fiscal discipline; |
| • | We believe Mr. Loeb does not possess the long-term focus necessary to drive value for ALL Sotheby’s shareholders; and |
| • | Sotheby’s Board and management are steadfast in their commitment to strong corporate governance and shareholder stewardship. |
Sotheby’s shareholders are reminded that their vote is important, no matter how many or how few shares they own. Whether or not shareholders plan to attend the Annual Meeting, they have an opportunity to protect their investment by voting the GREEN proxy card FOR Sotheby’s 12 director nominees: John M. Angelo, Jessica Bibliowicz, Kevin C. Conroy, Domenico De Sole, The Duke of Devonshire, Daniel Meyer, Allen Questrom, William F. Ruprecht, Marsha E. Simms, Robert S. Taubman, Diana L. Taylor, and Dennis M. Weibling.
If shareholders have any questions, require assistance with voting the GREEN proxy card, or need additional copies of the proxy materials, please contact the Company’s proxy solicitor listed below:
MORROW & CO., LLC
470 West Avenue
Stamford, CT 06902
203-658-9400
or
Call toll free at 1-800-279-6413
Forward-looking Statements
This letter contains certain “forward-looking statements,” as such term is defined in Section 21E of the Securities Exchange Act of 1934, as amended, relating to future events and the financial performance of Sotheby’s. Such statements are only predictions and involve risks and uncertainties, resulting in the possibility that the actual events or performance will differ materially from such predictions as a result of certain risk factors. As such, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as to management’s plans, assumptions and expectations as of the date hereof. Please refer to Sotheby’s most recently filed Form 10-K (and/or 10-Q) and other filings for a discussion of material Risk Factors. Sotheby’s disclaims any duty to update or alter any forward-looking statements, except as required by applicable law.
FOR MORE NEWS FROM SOTHEBY’S
Visit: www.sothebys.com/en/news-video.html
Follow: www.twitter.com/sothebys
Join: www.facebook.com/sothebys & www.weibo.com/sothebyshongkong
Watch: www.youtube.com/sothebys
Sotheby’s has been uniting collectors with world-class works of art since 1744. Sotheby’s became the first international auction house when it expanded from London to New York (1955), the first to conduct sales in Hong Kong (1973), India (1992) and France (2001), and the first international fine art auction house in China (2012). Today, Sotheby’s presents auctions in eight different salesrooms, including New York, London, Hong Kong and Paris, and Sotheby’s BidNow program allows visitors to view all auctions live online and place bids in real-time from anywhere in the world. Sotheby’s offers collectors the resources of Sotheby’s Financial Services, the world’s only full-service art financing company, as well as private sale opportunities in more than 70 categories, including S|2, the gallery arm of Sotheby’s Contemporary Art department, as well as Sotheby’s Diamonds and Sotheby’s Wine. Sotheby’s has a global network of 90 offices in 40 countries and is the oldest company listed on the New York Stock Exchange (BID).
Contacts:
Press Department | 212 606 7176 | Andrew Gully | Andrew.Gully@Sothebys.com
Investor Relations | 212 894 1023 | Jennifer Park | Jennifer.Park@Sothebys.com
Joele Frank | 212 355 4449 | Steve Frankel / Barrett Golden / Jed Repko
Morrow & Co. LLC | 203 658 9400 | Joe Mills / Tom Ball
 Investor Update
April 17, 2014
Forward-looking Statements: This presentation contains certain “forward-looking
statements” (as such term is defined in the Securities and Exchange Act of 1934, as
amended) relating to future events and the financial performance of the Company. See Statement
on Forward-Looking Statements in the Appendix to this presentation.
|
 2
SETTING THE RECORD STRAIGHT
•
Sotheby’s has consistently delivered strong, long-term performance and is
executing a clear strategy to drive continued growth and
profitability •
Sotheby’s maintains a strong leadership position within the art market and
continues to invest in areas exhibiting substantial growth and potential
for attractive returns
•
Your Board and management remain keenly focused on expense management
and have effectively managed the capital needs of a growing and cyclical
business with prudent fiscal discipline
•
Sotheby’s Board and management are steadfast in their commitment to strong
corporate governance and shareholder stewardship
Sotheby’s Board and Management Are Committed to
Creating
Long-Term
Value
for
ALL
Shareholders
Given Recent Misleading Claims Regarding Sotheby’s,
It Is Appropriate to Present the Facts |
 3
SOTHEBY’S HAS DELIVERED STRONG,
CONSISTENT LONG-TERM PERFORMANCE
Sotheby’s Continues to Drive Sustainable Success and Value
Creation by Expanding its Presence in Key Categories and Channels
2004
Today / 2013
Auction
Sales
$2,647
$5,127
Asian Art
Sales
Contemporary
Sales
Largest Online
Bid
Private
Sales
$355
$1,368
-
$18
$263
$1,179
$169
$857
Third
Point
Claim:
“Flattish
sales”
over
time
US$ in millions |
 2013 | A
RECORD YEAR FOR SOTHEBY’S Sotheby’s Has Delivered Strong Financial
Performance, Including Record Sales in 2013 and Numerous Record Auction
Results Across Categories •
In 2013, Sotheby’s distinguished itself as the fastest growing global
auctioneer
•
The Company reported consolidated sales of $6.3 billion
and an 11%
increase
in
total
revenues
•
Net income and earnings per share both increased by 20%
over 2012
•
Sotheby’s strong performance accelerated during the second half of
2013,
with
earnings
increasing
by
81%
over
the
second
half
of
2012
•
Third Point’s comparison of Sotheby’s 2013 results to 2007 fails to
acknowledge significant changes including:
o
Increased globalization of our business, opening up a new frontier
of opportunities
o
Investment in strategic opportunities to generate long-term growth
in key categories and channels
o
Shifts in our customer base and the costs required to serve them
o
Increased investment in customer service / post-sale, resulting in
long-term client loyalty
o
Increased price competition
Strong performance continuing into 2014
o
Year-to-date auction sales up 42% over 2013
o
Spring Hong Kong sales series up 56% over 2013
Sotheby’s Revenue | $ in millions
Sotheby’s EPS | $ per Share
Third Point Claim: 2013 Was Not a Strong Year
4 |
 SOTHEBY’S HAS A SOUND STRATEGY FOR GROWTH AND A PROVEN
TRACK RECORD OF CREATING AND MAINTAINING LONG-TERM VALUE
Sotheby’s Strategy Is to Pursue Opportunities that Strengthen the Core
Agency Business, Increase Exposure to Fast Growing New Markets and
Expand the Breadth and Profitability of the Sotheby’s Brand
Capture Global
Wealth
Opportunities
•
Expand into key markets across the world,
such as Asia, the Middle East, Russia and
Latin America
•
Leverage existing expertise and knowledge to
enhance Sotheby’s Private Sales initiatives
•
Fall series in Hong Kong generated $538 million, the
highest
ever
for
any
global
auction
house
in
Asia
•
In
2013,
Private
Sales
increased
by
30%
to
record
$1.2 billion
•
Continuously enhance online bidding platform
•
Explore collaborations and innovations to
expand digital business
•
Engage across social media platforms
•
In 2013, achieved 45% increase in online bidding
•
Regularly registers online bids exceeding $1 million,
including record $3.5 million online sale of
Audobon’s
“The
Birds
of
America”
in
early
2014
•
Attach brand to opportunities with a reputation
of expertise, credibility, trust and prestige
•
Leverage key personnel for exceptional brand
management
•
Applied brand to luxury endeavors including
high-end retail wine sales and diamond retail
sales •
In 2014, hired brand expert Alfredo Gangotena as
Chief Marketing Officer
•
Establish dedicated credit facility to enable
debt-funding of loans
•
Target expansion of loan portfolio to increase
loan returns and drive core auction sales
•
Loan
portfolio
growth
of
200%
from
2009
to
2013
•
On April 15, announced significant growth in our
lending business, with a 19% increase in assets to
$564
million
from
balance
at
year
end
2013
Digital
Strategy
Brand
Expansion
Loan Portfolio
Sotheby’s Strategy
Performance and Results
Third Point Claim: Failed to Seize Growth Opportunities
5 |
 6
S&P 400
MidCap
Index
SOTHEBY’S SHARE PRICE PERFORMANCE IN CONTEXT
We Have Delivered Superior Shareholder Returns In a Business Heavily
Influenced by the Economic and Auction Market Cycles
Source: Bloomberg, company filings; market data as of April 15, 2014
US$ in billions
Third Point Claim: Leadership Has Failed to Create Enduring Value For
Shareholders Five
Year
TSR
1
Ten
Year
TSR
1
Market Capitalization Growth
Cyclical Aggregate Auction Sales
S&P 400
MidCap
Index
Sotheby's
Christie's
$ 0.8
$ 2.7
15-Apr-04
15-Apr-14
171 %
363 %
157 %
268 %
$3.4
$3.6
$3.4
$4.9
$5.9
$8.1
$11.0
$9.5
$5.2
$8.7
$9.8
$9.7
$10.9
2001
2003
2005
2007
2009
2011
2013
1 |
 7
SOTHEBY’S REMAINS COMMITTED TO PURSUING MARKET
SHARE IN A FOCUSED AND RATIONAL MANNER
Sotheby’s Has Strong Market Share and Profitability;
Not All Market Share Is Good Market Share
“When
Christie’s
sold
Jeff
Koons’s
“Balloon
Dog
(Orange)”
for
$58.4 million in November, it seemed as if the auction house had
just earned a pretty penny. After all, Christie’s, like other auction
houses, typically charge commissions to buyers and sellers, which
for high-priced works might be an eighth to a quarter of the gavel
price.
But the owner of the work, the newsprint magnate Peter M. Brant,
said
Christie’s
certainly
made
no
money
from
him.
To
secure his business, the house waived the seller’s commission, he
said, and then, as a sweetener, gave him a large share of the
buyer’s fees.
Typically, a seller might pay about 10 percent commission on a
$100,000
artwork.
A
buyer
would
pay
about
25
percent.
But
for
some works of art —
commonly those worth $1
million or above —
sellers don’t usually pay
anything.”
-
New York Times, 15-January-2014
•
Management has taken a deliberate and rational
approach to pursuing market share; not all share is
good share, particularly if the price to Sotheby’s is a
lower than acceptable margin
•
Sotheby’s share of the art auction market has remained
relatively stable over the long term, holding ~50% share
against its traditional competitor
•
Sotheby’s will continue to take action to prudently
increase market share in relevant categories
Impressionist
55%
Old Masters
54%
Private Sales
50%
Contemporary
42%
Asia
50%
Consolidated Sales
47%
Sotheby’s 2013 Share
Third Point Claim: Failure to Gain Market Share
Outside Perspective on Commission Margins
Note: Emphasis added |
 8
KEEN FOCUS ON EXPENSE DISCIPLINE AND MANAGEMENT
Sotheby’s Has Significantly Reduced Costs and Is Committed to Growing with
Discipline Fractional Commissions
Third
Point
Claim:
Unchecked
Use
of
Fractional
Commissions;
Cost
Saving
Plans
Lack Credibility; CEO Compensation is Too High
Long-Term Auction Commission Margins
Expense Management
Weak auction market led to irregularly high
commission margins due to unusually high
proportion of low value lots
1
See proxy statement for more detail..
* See Appendix on non-GAAP Financial Measures for more detail.
•
CEO compensation is well below ISS and
Glass Lewis Sotheby’s peer group medians
•
Pay is highly correlated with performance: 87%
of CEO target pay is performance-based
•
Compensation Committee highly responsive to
shareholder views on compensation structure
CEO Compensation
•
Sotheby’s expenses have grown an average of
0.5%*
per year since 2007
•
During that period, Sotheby’s invested
significantly in strategic opportunities (e.g. Asia,
digital, private sales) and globalized its
infrastructure
•
Competitive auction consignment market requires
flexible commission margins
•
Despite this, Sotheby’s has maintained average
commission margins of ~16% over the long term
1 |
 COMMITTED
TO STRONG CORPORATE GOVERNANCE AND SHAREHOLDER STEWARDSHIP
Our Actions Are Part Of a Long Term Approach Begun Well Before Any Activism
and Consistent With Our Long History of Shareholder Engagement
Third Point Claim: Activist Presence in Stock Was the Catalyst for Recent
Change Strong Corporate
Governance
2011
Ongoing
Capital Structure
and Capital
Allocation
Expansion Into Key
Markets and
Channels
•
Since 2011 –
Five new independent directors have been added to the Board
•
July
2013
–
Announced
plans
to
add
Domenico
de
Sole
in
December
2013,
at
which
point
he was named Lead Independent Director
•
March
2014
–
Sotheby’s
nominated
two
additional
independent
directors
to
the
Board,
adding relevant and incremental expertise
•
2008 –
Raised capital to support growth in guarantees and other business
requirements •
2009
–
Began
emphasis
on
expanding
loan
portfolio;
which
grew
by
200%
by
2013
•
2009
–
2010
–
Proactively
de-risked
balance
sheet
in
light
of
broad
macroeconomic
and
art
market pressures and initiated discussions on capital allocation
•
Early
2013
–
Initiated
real
estate
review
of
New
York
Headquarters
•
September
2013
–
Announced
Capital
Allocation
and
Financial
Policy
Review
•
March
2014
–
Distributed
excess
available
cash
to
shareholders
via
a
special
dividend
of
$300 million and announced $150 million share repurchase program
•
2009 –
Inaugural auction in Doha, the first international auction ever in Qatar
•
September 2011 –
Opened S | 2 private sales gallery in New York
•
September
2012
–
Established
Sotheby’s
as
the
first
international
fine
art
auction
house
in
China. Held largest mainland auction in 2013 with sales of $37 million
9 |
 10
SOTHEBY’S HAS THE RIGHT BOARD TO CONTINUE TO
DELIVER LONG-TERM VALUE TO SHAREHOLDERS
Your Board Represents Twelve Distinct Voices on Your Behalf;
Third Point’s Slate Represents Three Voices Acting in Concert
Directors added since 2011
•
Sotheby’s has nominated five new directors since
2011
•
Two of the three Board members targeted by
Third Point have recently been added and bring
expertise that Mr. Loeb suggests is relevant to
Sotheby’s
•
Named a new lead independent director
•
10 of 12 directors are independent
•
Average tenure of ~7.1 years versus ~8.6 years
for the S&P 500
•
Average director compensation of ~$138k per
annum well below average of ~$249k for the S&P
500
•
In 2013, nearly 50% of director compensation, on
average, was paid in the form of stock awards
1
Source:
Spencer
Stuart
Board
Index
2013
Third Point Claim: Board Lacks Fresh Perspectives
Name
Year
Independent
John M. Angelo
2007
Jessica M. Bibliowicz
2014
Kevin C. Conroy
2014
Domenico De Sole
2013
The Duke of Devonshire
1994
Daniel Meyer
2011
Allen Questrom
2005
William F. Ruprecht
2000
Marsha E. Simms
2011
Robert S. Taubman
2000
Diana L. Taylor
2007
Dennis M. Weibling
2006
1
1 |
 11
ONE-YEAR SHAREHOLDER RIGHTS PLAN
DESIGNED TO PROTECT ALL INVESTORS
•
The
one-year
shareholder
rights
plan
expires
in
October
2014
--
cannot
be
extended without shareholder approval
•
The Sotheby’s shareholder rights plan is extremely shareholder friendly
•
Sotheby’s has never in its history had a shareholder rights plan
•
Third Point’s last-minute litigation seeks relief to buy votes after the
record date
•
Rights plan is an important tool to ensure ALL Sotheby’s shareholders are
treated fairly and have votes that count
Rights Plan Was Implemented to Ensure the Fair Treatment of All Shareholders
Third Point Claim: Shareholder Rights Plan Intended to Entrench the Board
|
 WE
BELIEVE MR. LOEB DOES NOT POSSESS THE LONG-TERM FOCUS NECESSARY
TO
DRIVE
VALUE
FOR
ALL
SHAREHOLDERS
Mr. Loeb’s Agenda Is Not in the Best Interests of All Shareholders
A Letter to Dan Loeb Regarding
Sotheby’s
“It is a truth universally acknowledged
that
anyone
in
the
art
world
in
possession of a good fortune and
some business smarts thinks they
can
run
an
auction
house.
Or
more
accurately, thinks they can do it better
than whomever is doing so at the
time. They believe they can negotiate
better contracts, cut more costs,
appraise more accurately, marshal
more nation’s treasures to the block.
Reality is a little more
complicated.”
-
Alexandra Peers, artnet®
news, 10-Apr-2014
Lack of a Substantive Plan and Relevant Leadership Skills
Disruptive Actions
•
Loeb’s pattern of disruptive behavior has triggered concerns from clients,
staff
and
business
counterparties
that
are
damaging
to
your
Company
•
We’ve
been
informed
that
Mr.
Loeb
has
asserted
to
Sotheby’s
employees
and
business
counterparties
that
he
controls
certain
key
company
matters
•
Erratic
and
aggressive
behavior
suggest
he
would
be
a
disruptive
force
on
your
Company’s
Board
Precedent Board Experience
Note: Emphasis added
12
Average
public
board
tenure
of
less
than
two
years
Deal
to
sell
back
shares
to
Yahoo!
at
a
price
unlikely
to
be
obtained
on
the
open market
and
in
a
transaction
not
available
to
all
shareholders
Taking
credit
for
Yahoo!’s
share
price
performance,
ignoring
exogenous
factors outside
of
his
control
(e.g.
Alibaba)
Mr.
Loeb’s
aggressive
actions
have
been
disruptive
to
Sotheby’s
business
Allegations
unfounded
and
Third
Point
offers
no
plan
to
create
value
Arbitrary
pro
forma
EPS
calculation
is
NOT
a
plan
for
value
creation
Third
Point’s
slate
does
not
add
incremental
and
relevant
expertise
to
your
Board |
 13
SOTHEBY’S HAS THE RIGHT BOARD, LEADERSHIP TEAM AND
STRATEGY IN PLACE TO DELIVER VALUE FOR ALL SOTHEBY’S
SHAREHOLDERS NOW AND OVER THE LONG TERM
Sotheby’s Is a Market Leader with Outstanding Results
•
Sotheby’s benefits from a solid financial foundation
•
Your Board is independent and has the strength, diversity, experience and
qualifications to continue to provide excellent oversight and continue
delivering value for shareholders
•
Your Board is committed to sound corporate governance practices
•
Sotheby’s has engaged frequently with Third Point and other shareholders,
and your Board is committed to aggressively pursuing the best interests of
ALL
Sotheby’s shareholders. We believe shareholders should question
whether Mr. Loeb will do the same
•
Sotheby’s Board has concluded that Mr. Loeb’s nominees add no relevant
skills, experience or expertise that is not already effectively represented
on the Board
•
Through his interactions with Sotheby’s Board, we believe Mr. Loeb has
shown that he would be a disruptive director
Your Vote Is Important -
We Encourage You to Vote Your Shares in
Support of Your Board on the GREEN Proxy Card |
 APPENDIX |
 15
FORWARD LOOKING STATEMENTS AND OTHER
INFORMATION
This presentation contains certain “forward-looking statements,” as such term is defined
in Section 21E of the Securities Exchange Act of 1934, as amended, relating to future events
and the financial performance of Sotheby’s. Such statements are only predictions and
involve risks and uncertainties, resulting in the possibility that the actual events or
performance will differ materially from such predictions as a result of certain risk factors. As such,
readers are cautioned not to place undue reliance on forward-looking statements, which
speak only as to management’s plans, assumptions and expectations as of the date hereof.
Please refer to Sotheby’s most recently filed Form 10-K (and/or 10-Q) and other filings
for a discussion of material Risk Factors. Sotheby’s disclaims any duty to update or alter any
forward-looking statements, except as required by applicable law. This
presentation contains quotes and excerpts from certain previously published material. Consent of the author and
publication has not been obtained to use the material as proxy soliciting material. Sotheby’s,
its directors, director nominees and certain of its executive officers are participants in the solicitation of proxies
from Sotheby’s stockholders in connection with Sotheby’s 2014 Annual Meeting of
Stockholders. Sotheby’s has filed its definitive proxy statement and form of GREEN proxy
card with the U.S. Securities and Exchange Commission (the “SEC”) with respect to the
2014 Annual Meeting of the Stockholders. SOTHEBY’S STOCKHOLDERS ARE STRONGLY ENCOURAGED TO
READ THE DEFINITIVE PROXY STATEMENT (INCLUDING ANY AMENDMENTS AND SUPPLEMENTS) AND ACCOMPANYING
GREEN PROXY CARD AS THEY CONTAIN IMPORTANT INFORMATION. Information regarding the names
of Sotheby’s directors, director nominees and executive officers and their respective
interests in Sotheby’s by security holdings or otherwise, is set forth in Sotheby’s
definitive proxy statement for the 2014 Annual Meeting of Stockholders and other materials to
be filed with the SEC. Additional information can also be found in Sotheby’s Annual Report
on Form 10-K for the year ended December 31, 2013, filed with the SEC on February 27, 2014.
These documents, including any proxy statement (and amendments or supplements thereto) and other
documents filed by Sotheby’s with the SEC, are available for no charge at the SEC’s
website at http://www.sec.gov and at Sotheby’s investor relations website at
http://investor.shareholder.com/bid/index.cfm. Copies may also be obtained by contacting
Sotheby’s Investor Relations by mail at 1334 York Avenue, New York, NY 10021 or by telephone at
800-700-6321 or 212-894-1023. |
 16
USE OF NON-GAAP FINANCIAL MEASURES
GAAP refers to generally accepted accounting principles in the United States of
America. Included in this presentation are financial measures
presented in accordance with GAAP and also on a non-GAAP basis. In this presentation,
Sotheby’s
discusses
adjusted
total
expenses
for
2013
and
2007,
which
are
supplemental
financial
measures
that
are
not
required by or presented in accordance with GAAP.
Sotheby’s defines adjusted total expenses as total expenses, excluding the
cost of principal revenues, an impairment loss, and a gain on the sale of
land and building. Management cautions users of Sotheby's financial statements that
amounts presented in accordance with its definitions of these non-GAAP
financial measures may not be comparable to similar measures disclosed by
other companies because not all companies and analysts calculate such measures in the
same manner. Management believes that these non-GAAP financial measures
provide important supplemental measures of Sotheby's performance and that
these measures may be used by securities analysts, investors, financial institutions,
and other interested parties in the evaluation of Sotheby's. Reconciliation of
adjusted total expenses to total expenses derived in accordance with GAAP
are presented under “Reconciliation of Non-GAAP Financial Measures.”
The following is a reconciliation of total expenses to adjusted total expenses for
2013 and 2007: 2013
2007
Total Expenses
$631,103
$641,940
Less:
Cost of principal revenues
($30,307)
($49,161)
Impairment loss
-
(14,979)
Gain on sale of land and building
-
4,752
Total adjusted expenses
$600,796
$582,552
Increase in total adjusted expenses
$18,244
CAGR
0.5 %
*Reconciliation of Non-GAAP Financial Measures |