Sotheby's (NYSE:BID) today announced that it is mailing a letter to
shareholders in connection with the Company's 2014 Annual Meeting
of Shareholders, which will be held on 6 May 2014.
Highlights of the letter include:
- Sotheby's believes Third Point has presented misleading
information that distorts the reality at Sotheby's.
- Sotheby's strong financial and operating performance under the
stewardship of Sotheby's Board and management team demonstrates
that Mr. Loeb's assertions lack substance. Sotheby's
is: -- Increasing its global footprint by
expanding into key emerging markets with attractive dynamics and
growth potential; -- Maintaining – and building
upon – a leadership position across multiple art auction market
categories, leveraging its global, enduring brand and deploying
innovative strategies; -- Demonstrating a
disciplined approach to growth, capital allocation and return of
capital; and -- Creating value for ALL Sotheby's
shareholders.
- Under the stewardship of Sotheby's Board and management team,
Sotheby's has delivered significant shareholder returns.
- Sotheby's has the right Board, the right leadership, and the
right strategy to deliver shareholder value now and into the
future.
SUPPORT YOUR BOARD'S RECORD OF VALUE
CREATION BY VOTING THE GREEN PROXY CARD TODAY
17 April 2014
Dear Sotheby's Shareholder:
At the Annual Meeting of Shareholders on 6 May 2014, the
composition of your Board of Directors, and thereby the future
priorities of this well-managed and highly profitable business,
will be decided. We ask that you support your Board's
highly-qualified director nominees and their long-term strategic
plan, which has created significant shareholder value, and reject
Third Point's handpicked nominees.
To build on Sotheby's success, it is
important that you vote the GREEN proxy card "FOR" ALL 12 of
Sotheby's director nominees. We urge you not to
return any white proxy card sent to you by Third Point. If you
have already returned a white proxy card, a later dated
GREEN proxy card will revoke that vote. Only
your latest dated card counts.
WE BELIEVE THIRD POINT HAS PRESENTED
MISLEADING INFORMATION THAT DISTORTS THE REALITY
AT SOTHEBY'S
As part of his solicitation efforts, Dan Loeb of Third Point has
made a number of misleading assertions regarding Sotheby's and its
strategic direction. Sotheby's strong financial and operating
performance under the stewardship of your Board and management team
demonstrates that Mr. Loeb's assertions lack
substance. Sotheby's is:
- Increasing our global footprint by expanding into key emerging
markets with attractive dynamics and growth potential;
- Maintaining – and building upon – our leadership position
across multiple art auction market categories, leveraging our
global, enduring brand and deploying innovative strategies;
- Demonstrating a disciplined approach to growth, capital
allocation and return of capital; and
- Creating value for ALL shareholders.
Please do not be misled by Mr. Loeb and Third Point. Here
are the facts about Sotheby's growth strategies, record of
performance and the value creation delivered by your Board of
Directors and management team:
FACT: Sotheby's is delivering strong financial
performance. In 2013, Sotheby's was the fastest
growing global auctioneer and reported:
- Record consolidated sales of $6.3 billion;
- 11% increase in total revenues to $853.7 million;
- 20% increase in net income to $130 million (with net income
improving 81% in the second half of 2013 versus the same period one
year earlier); and
- 29% EBITDA* margin.
These strong results reflect numerous auction records across
categories including in Contemporary, Jewelry, Chinese sculpture,
and for numerous artists such as Andy Warhol, Norman Rockwell, Zao
Wou-ki, El Greco and Georges Braque, to name a few.
Notably, the momentum has accelerated in 2014. The
Company's global auction sales to date are up approximately 42%
year over year, with Sotheby's record-setting Impressionist Art
sales in London achieving the highest value for any sales series
held anywhere in London. We look forward to reporting full
first quarter results next month.
FACT: Sotheby's is successfully expanding its reach into
new, fast growing markets – including Asia. Earlier
this month, Sotheby's reported auction results from its Spring
sales in Asia that set new individual records and increased
approximately 56% over the equivalent sales one year
ago. Sotheby's October 2013 sales series in Hong Kong
generated $538 million, more than double the previous year's sales
and the highest ever for any global auction house in
Asia. Sotheby's also achieved the most successful sale in
Beijing of any international art auctioneer. These record
results build on Sotheby's momentum in this key growth market where
the Company has established an industry leading network to source
artworks and to attract collectors.
FACT: Sotheby's initiatives to grow Private Sales are
succeeding. Wealth for ultra-high-net-worth
individuals is growing, and Sotheby's is uniquely positioned to
capture this market opportunity as a result of the Company's deep
expertise and longstanding relationships across the art
world. Sotheby's recognized the opportunity in Private Sales
and took action, dedicating significant management and specialist
talent to this arena. The success of these initiatives is
reflected in Sotheby's record 2013 Private Sales, which totaled
$1.2 billion – a 30% increase from 2012 and an increase of nearly
150% since 2009.
FACT: Sotheby's is driving significant growth across all
segments of the art auction market – including
Contemporary. Sotheby's Contemporary art sales have
increased by 528% over the last 10 years. In 2013, the Company
set a new record for Contemporary sales at its November evening
sale and nearly doubled the number of Contemporary works over $20
million sold at auction as compared to the prior year.
FACT: Sotheby's has a robust digital strategy that is
also delivering results. Investments in Sotheby's
digital strategy have enabled the Company to achieve a 45% increase
in online bidding through the Company's BIDnowTM platform, which
regularly registers bids exceeding $1 million. Original
content – a key differentiator – is read by clients in more than
180 countries. Sotheby's also achieved a new record for an
online purchase in a live auction earlier this month with the $3.5
million sale of John James Audobon's "The Birds of
America." While Sotheby's digital investments, and investments
in other new markets, have increased expenses in the short-term,
the benefits we are realizing demonstrate the value of these
strategies and the importance of making prudent investments in key
areas of the business in order to achieve future results.
FACT: Sotheby's benefits from a strong financial
foundation appropriate to the needs of the
business. Under Sotheby's Capital Allocation
and Financial Policy Plan, Sotheby's has paid a $300 million
special dividend and commenced a $150 million share repurchase
program. The plan contemplates potential incremental near-term
capital return from the Company's loan book and real estate
initiatives, and establishes a financial framework for an annual
return of excess capital and clear financial return hurdles for
future investment decisions. And on April 15, we
announced significant growth in our lending and specialty finance
business facilitated by our capital allocation strategies, with a
current portfolio balance of $564 million, which is a 19% increase
from the $474 million balance at the end of 2013. Your Board has
always been and will continue to be committed to an appropriate
capital allocation and financial strategy regardless of Mr. Loeb's
investment.
FACT: Sotheby's has significantly reduced costs and is
committed to continuing to grow with
discipline. During the last six-year period
(2007-2013), adjusted total expenses have increased only 0.5%* per
year despite the Company's significant investment in globalization
and growth strategies, as discussed above. Recently, under the
Board's direction as part of Sotheby's annual planning process,
management conducted a cost structure review and identified $22
million of cost savings, the equivalent of approximately 10% of
2013 operating income – and we won't stop there. We will
continue to ensure that Sotheby's operations run efficiently
without compromising client service and important growth
initiatives.
FACT: Mr. Loeb has made a number of recommendations for
the Company that simply do not make sense for the business,
particularly given the unique attributes of being a global art
auctioneer. For example, Third Point's suggestion
that offering consignors "fractional commissions" (which is not
unique to Sotheby's), can simply be "curtailed" ignores the reality
of the auction business and the competitive drivers behind
consignment wins. Other recommendations from Mr. Loeb,
including investing in "talent development" and "front-end
technology," are rhetorical bromides with no insight into our
business. Like other successful companies, we focus on these
fundamental building blocks every day. Similarly, Mr. Loeb's
suggestion that Sotheby's pro forma EPS could be "doubled" relies
on unrealistic assumptions and selective data.
FACT: Sotheby's has a proven Board of Directors and
leadership team who are committed to building on your Company's
success. Of Sotheby's 12 highly qualified directors,
we will have added five new independent directors in the past three
years, including the Company's Lead Independent Director. We
have also made important additions to Sotheby's senior management
team, including the appointment of a new Chief Financial Officer
and new Chief Marketing Officer. These additions, and the work
supporting their recruitment, reflect your Board's efforts to
ensure that Sotheby's maintains the right mix of skills and
experience to continue executing on the Company's goals; they are
totally unrelated to any suggestion or effort by Mr. Loeb.
UNDER THE STEWARDSHIP OF YOUR BOARD AND
MANAGEMENT TEAM, SOTHEBY'S HAS DELIVERED SIGNIFICANT SHAREHOLDER
RETURNS
Sotheby's stock price is trading well above historical averages
and has outperformed or matched all relevant indices over the one,
five and ten year periods. These returns – as well as
Sotheby's strong operating and financial performance – are not new
since Mr. Loeb's investment.
SOTHEBY'S HAS THE RIGHT BOARD, THE RIGHT
LEADERSHIP, AND THE RIGHT STRATEGY TO DELIVER SHAREHOLDER VALUE NOW
AND INTO THE FUTURE
Sotheby's is a market leader with a global, enduring brand,
strong operating and financial performance, and significant
shareholder returns. By executing on our growth initiatives,
Sotheby's benefits from a platform and footprint that reach all key
channels and geographic regions.
Your Board and management team regularly review the Company's
business and strategies to drive success, and we will continue to
do so. As we look at the first and second quarters to date, we
see significant sales growth that we believe will continue to
reward shareholders. Third Point has made no case that change
is warranted. Sotheby's strong performance merits your support
of your Board.
Your vote is
important. We urge you to protect
your investment by voting the enclosed GREEN proxy
card today "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.
On behalf of your Board and management team, we thank you for
your continued support.
Sincerely,
Bill
Ruprecht
Domenico De Sole Chairman, President and
Chief Executive
Officer
Lead Independent Director
Sotheby's shareholders should vote the GREEN proxy card
today. Shareholders should disregard the white proxy card
or any other materials they receive from Third Point.
If you have any questions or require any assistance voting your
shares, please contact the Company's proxy solicitor listed
below:
________________________________________
MORROW & CO.,
LLC
470 West Avenue Stamford, CT
06902
(203) 658-9400 or (800) 279-6413
_________________________________________
Use of Non-GAAP Financial Measures
GAAP refers to generally accepted accounting principles in the
United States of America. Included in this letter are
financial measures presented in accordance with GAAP and also on a
non-GAAP basis. In this letter, Sotheby's discusses EBITDA
margin for 2013 and 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 EBITDA as net income (loss), excluding income
tax expense (benefit), interest expense, interest income, and
depreciation and amortization. Sotheby's defines EBITDA margin as
EBITDA as a percentage of total revenues. 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. Management also utilizes
EBITDA in analyzing Sotheby's performance and in the determination
of annual incentive compensation. Reconciliations of EBITDA to net
income derived in accordance with GAAP and adjusted total expenses
to total expenses derived in accordance with GAAP are presented
under "Reconciliation of Non-GAAP Financial Measures."
*Reconciliation of Non-GAAP Financial
Measures
The following is a reconciliation of net income to EBITDA and
the calculation of EBITDA margin for 2013 (in thousands of
dollars):
|
2013 |
Net income |
$ 130,006 |
Income tax expense |
55,702 |
Income tax expense related to earnings
from equity investees |
12 |
Interest income |
(2,801) |
Interest expense |
42,712 |
Depreciation and amortization
expense |
19,435 |
EBITDA |
$ 245,066 |
|
|
Total revenues |
$ 853,678 |
|
|
EBITDA Margin (a) |
28.7% |
|
|
(a) Represents total revenues
as a percentage of EBITDA. |
CONTACT: 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
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