Sotheby's Q4 Results Miss View, Loeb Launches Proxy Fight

(RTTNews) - Auction house Sotheby's (BID), Monday reported a 37 percent increase in profit for the fourth quarter from last year, reflecting higher auction sales. However, both revenue and earnings per share for the quarter missed analysts' expectations.

Meanwhile, activist investor Daniel Loeb's hedge fund Third Point LLC has launched a proxy fight at Sotheby's by nomination three candidates, including Loeb, to stand for election to Sotheby's board of directors at the company's 2014 annual meeting.

New York-based Sotheby's net income for the fourth quarter rose to $90.75 million or $1.30 per share from $66.09 million or $0.96 per share in the year-ago period. On average, five analysts polled by Thomson Reuters expected the company to earn $1.40 per share for the quarter. Analysts' estimates typically exclude special items.

The increase in net income for the quarter was driven by a 28 percent increase in net auction sales, reflecting the continuing strength of the global art market as Sotheby's autumn sales of Asian Art in Hong Kong and Impressionist Art in New York significantly exceeded prior year results.

Total revenues for the quarter rose 17 percent to $339.20 million from $291.12 million a year ago. Analysts had a consensus revenue estimate of $351.58 million for the quarter.

For fiscal 2013, Sotheby's net income rose to $130.00 million or $1.88 per share from $108.29 million or $1.57 per share in the previous year. The increase in profit primarily reflects a 14 percent increase in net auction sales and a 30 percent increase in private sales to a record $1.2 billion.

Revenues for the year grew 11 percent to $853.68 million from $768.49 million last year.

Street expected the company to earn $1.98 per share for the year on revenues of $866.05 million.

Consolidated sales for the year rose 17 percent from last year to $6.3 billion.

In January, Sotheby's announced the results of its Capital Allocation and Financial Policies Review that was highlighted by the return of $300 million to shareholders in March 2014 through a special dividend, as well as the intended repurchase of about $25 million of shares by the end of 2014.

Sotheby's said that over the next 12 to 24 months, it anticipates efforts in two other areas to unlock significant value for shareholders - additional debt-financing of the Sotheby's Financial Services loan portfolio that could result in the return of an additional $150 million to $200 million to shareholders, and an evaluation of its real estate holdings that could also lead to a return of excess capital to shareholders in the future.

In a separate statement, Sotheby's said its board of directors a quarterly dividend of $0.10 for the first quarter of 2014. The dividend is payable on March 17, 2014 to shareholders of record as of March 10, 2014.

In another statement, Sotheby's said it had engaged in extensive talks with Third Point over the past months in an effort to reach a resolution that would avoid a proxy battle and was "disappointed" that Third Point has chosen that path.

Sotheby's said it had made several efforts to reach an agreement with Loeb, including an offer to appoint Loeb to its board of directors, with roles on three key board committees. Further, the company noted that in conversations with its management, Loeb had characterized the company's Capital Allocation and Financial Policy Plan as the "right approach," striking a balance between returning capital to shareholders and continuing to invest in the business.

Sotheby's said it believes its Board is best positioned to support the company's continued growth and success. The company noted that its board was composed of 12 highly qualified directors, 10 of whom are independent, and three of whom joined the board in the past three years. However, the company added that the the board's nominating and corporate governance committee will consider the Third Point nominations in due course.

In response, Third Point said that the addition of Loeb on Sotheby's board would benefit the company and its owners. The company said it nominated two other directors "who are qualified experts in areas where the Board currently lacks much-needed depth."

Further, Third Point noted that a sole voice representing shareholder's interests in the boardroom will not be sufficient to bring about necessary change at Sotheby's and therefore, it has consistently adhered to its request for numerous board seats.

BID closed Thursday's regular trading session at $50.37, down $0.14 or 0.28 percent on a volume of 3.45 million shares. In after-hours, the stock further declined $0.90 or 1.79 percent to $49.47.