Changes Being Forced Upon Sotheby's?

The Wall Street Journal is reporting that activist investor Dan Loeb is attempting to replace William Ruprecht as head of Sotheby's.  According to the article Loeb is also looking to replace some board members to gain additional control and leverage at the auction house.

Many observers have concluded that Sotheby's is losing ground to Christies, and it certainly appears that Loeb is part of a group of investors (his group now owns over 9% of Sotheby's) who believe new leadership is necessary to grow and compete in the auction and luxury markets.

The Wall Street Joanl reports

The activist investor disclosed in a federal filing that his Third Point LLC has boosted its stake to 9.3% from 5.7%, making it the largest shareholder in Sotheby's.

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Highlights from Loeb's Letter
"Sotheby's is like an old master painting in desperate need of restoration," Mr. Loeb wrote in his letter, which took issue with the company's margins and competitive position with its top rival, Christie's International PLC.

He described Mr. Ruprecht as an "able leader" but someone who isn't the right person to take the auction house forward.

Mr. Loeb's letter continued, "It is apparent to us from our meeting that you do not fully grasp the central importance of contemporary and modern art to the company's growth strategy, which is highly problematic since these are the categories expanding most rapidly among new collectors."

In a statement Wednesday, Sotheby's said: "Today, rather than debating incendiary and baseless comments, we are focused on serving our clients' needs during this critical autumn sales season, including this week in Hong Kong, where our offerings are 77% higher than the same series last year—the highest estimate of any Sotheby's sale in Asia. We will comment on the communication from Third Point at the appropriate time."

A Sotheby's spokesman said Mr. Ruprecht and other executives are in Hong Kong for a series of auctions this week.

Mr. Loeb, who has an extensive personal collection of contemporary art, is a member of the board of trustees at the Museum of Contemporary Art in Los Angeles, is one of the big art collectors from Wall Street, along with Steven A. Cohen, of SAC Capital Advisors LP, Leon Black of Apollo Global Management LLC, APO +2.66% and Jeffrey Gundlach, of DoubleLine Capital LP. Mr. Loeb's $45 million penthouse in Manhattan's Upper West Side is filled with major examples by postwar artists including Andy Warhol, Jean-Michel Basquiat, Richard Prince, Cindy Sherman, Mike Kelley and Martin Kippenberger. He is known for occasionally hiring art advisers to scout art fairs and galleries on his behalf.

In 2009, Mr. Loeb sold an egg sculpture by contemporary artist Jeff Koons for $5.5 million through Sotheby's.

Mr. Loeb said he would find other board candidates, and is open to a candidate from another large holder as well.

"As with any important restoration, Sotheby's must first bring in the right technicians," the letter said. Mr. Loeb added that his firm is already in talks with potential outside candidates for the CEO position.

Mr. Ruprecht, who earned a bachelor's degree in fine arts from the University of Vermont, has been a trustee of his alma mater since March 2008, according to the university's website. He once was a maker of Shaker furniture before joining Sotheby's in 1980 as a typist. During his years with the auction house, he has served as managing director and director of marketing, before being named president and CEO in February 2000.

Source: The Wall Street Journal (please note, sometime WSJ articles are behind a pay wall and are not always available without subscription)