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We were just a little sorry to see the Sotheby's situation end. The poison pill litigation, the competing white papers, and how a huge hedge fund went after a fine art auction house, of all things, kept our attention.
Dan Loeb at Third Point (TP) probably wasn't sorry. He won some BoD seats, and Sotheby's will pay him $10 million for his proxy solicitation expenses. This generous figure prompted us to read the settlement agreement, which in turn led to some fascinating findings for all investors.
In short, for all they gain, or think they gain, investors give up a lot when they settle a proxy contest. We can use this particular settlement, which in many (but not all) respects is fairly typical, to illustrate how these settlements work. In the case of Sotheby's, it puzzles us, slightly, why TP would accept the settlement terms, when the alternative seems at least as attractive.
We cover settlement agreements in a current blog post.
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