Sotheby’s cutting staff, following plan suggested by Daniel Loeb
Sotheby’s [NYSE:BID] has said that it is planning to cut staff and reallocate others in the US and UK, a strategy suggested by activist investor Daniel Loeb of Third Point in his letters to the auction house’s investors earlier this year.
The firm says that restructuring will cost $13 million in the third quarter with staff being made redundant leaving before the end of 2014.
“The restructuring plan is the result of a strategic review conducted by management and will result in the real location of resources to collecting categories and regions with the highest growth opportunity in the future,” said the company in an Form 8K filing.
Third Point argued for restructuring in public letters when it was attempting to win seats on the auction house’s board.
In his second letter in April, Loeb attacked Sotheby’s board for failing to find meaningful cost savings – apart from cutting its marketing budget and the fees it pays to advisers.
He added: “The Company seemingly failed to make any serious efforts to tackle the harder issues. For example, it did not appear to analyze its organizational structure meaningfully, including considering if the organization is overstaffed or has mis-allocated employees to less profitable areas, nor did it undertake any other serious effort to take a long-term look at the complete expense base.”
Third Point won three seats on Sotheby’s board in May, just hours before Sotheby’s annual shareholder meeting. The $14.3 billion hedge fund is also now allowed to own up to 15% of the auction house’s shares, up from the 9.6% it owned in early May. Loeb, a keen art collector, joined the board along with Harry Wilson, a restructuring specialist, and former banker and jewellery expert Olivier Reza.
In the same letter, Loeb said: “We also believe that Sotheby’s has several clear opportunities for growth, including in online sales, auctions, adjacent areas, and brand extensions. We see several areas of opportunity available to the Company.”
Loeb did not refer to Sotheby’s in his second quarter letter to investors which was published on the same day as the job cuts were announced. Third Point generated a return of 2.6% for investors in the second quarter of 2014, under performing the S&P 500 which returned 5.2%. The fund’s performance for the first six months of 2014 was 6% versus 7.1% for the S&P 500. However, the fund has generated returns of 17.8% for investors since it was launched in 1996 versus 7.5% for the S&P 500.
Allen Questrom, a board member and member of the auction house’s audit and corporate governance committees resigned on June 18.