Sotheby’s Adopts Shareholder Rights Plan to Fend Off Loeb

Poison pen is being met with poison pill.

The auction house Sotheby’s announced on Friday that its board had adopted a shareholder rights plan, known as a “poison pill,” that is set off whenever an outsider acquires ownership of 10 percent or more of the company’s stock.

The company said that “the rights will not prevent a takeover, but should encourage anyone seeking to acquire the company to negotiate with the board prior to attempting a takeover.” The poison pill expires in 12 months unless approved by shareholders.

The move comes just two days after the hedge fund manager Daniel S. Loeb, known for his poison pen letters to corporate management and to rivals, called for Sotheby’s chief executive to step down, criticizing the company for “a lack of leadership and strategic vision at its highest levels.”

Mr. Loeb, who manages the hedge fund Third Point, also disclosed that he is now the auction house’s largest shareholder, with a 9.3 percent stake. The hedge fund had disclosed in August that it had a 5.7 percent stake in the company.  Other activist hedge funds have stakes in Sotheby’s.

After the disclosure of the initial stake, Sotheby’s announced that its would review its capital strategies, possibly weighing moves like a stock buyback or an increased dividend.

On Wednesday, Mr. Loeb called that statement a “belated announcement partially addressing poor capital allocation practices.”

Bill Ruprecht, Sotheby’s chief executive, said on Friday that the shareholder rights plan “is designed to protect the interests of all of our shareholders.”

“We look forward to continuing to engage in constructive dialogue with our investors regarding our plans for the business, our comprehensive capital allocation and financial review currently underway, and avenues for enhancing and delivering value to our shareholders,” he added.