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Third Point hedge fund increases Sotheby’s stake

Antony Dickson | AFP | Getty Image

The activist investor Daniel S. Loeb disclosed on Monday that he had acquired a large stake in the auction house Sotheby's, sending its shares up 3 percent.

Mr. Loeb's hedge fund, Third Point, is now one of Sotheby's biggest shareholders, with a 5.7 percent stake, according to a filing with the Securities and Exchange Commission. Third Point joins two other funds, Trian Partners and Marcato Capital, among the company's top shareholders.

Third Point said it planned to "engage in a dialogue" with the board at Sotheby's.

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Mr. Loeb is a prominent art collector and the walls at his Park Avenue office are covered with paintings. In the business arena, he is better known for his combative style and penchant for boardroom battles. He typically increases his stake in a company with the intention of instigating change at the top. He is known for directing sharp invective at corporate executives.

One of Mr. Loeb's most well-known boardroom brawls was with Yahoo in 2011. After disclosing a large stake in the company, Mr. Loeb called it "undervalued" and submitted a list of what he called "all-star" candidates to replace some of the directors.

The board rejected the proposal and instead hired Scott Thompson, whom Mr. Loeb promptly accused of faking his credentials. Mr. Thompson was fired and the board gave Mr. Loeb three seats on the board.

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Mr. Loeb has demonstrated a more conciliatory approach to dealing with board members more recently.

Earlier this year, he announced a large stake in Sony and called for a breakup of the company. After his proposal was rebuffed, Mr. Loeb praised the company's chief executive, Kazuo Hirai.

(Read more: Art buyers unfazed by falling stocks—for now)

In an interview with Variety, Mr. Loeb called Mr. Hirai's rejection letter "thoughtfully written," adding that the discussion of profits gave shareholders a lot "to hang their hats on."

Mr. Loeb has declined to comment on what he intends to do with his stake in Sotheby's. Two other activist investors, Nelson Peltz and Mick McGuire, have also acquired stakes in the company. Mr. Peltz's Trian Partners has a 3 percent stake, and Mr. McGuire's Marcato Capital has a 6.6 percent stake.

Sotheby's said in a statement: "Sotheby's board of directors and management team are committed to building long-lasting value for all of Sotheby's shareholders and we welcome investment in the company." Its shares closed at $47.21, up $1.37.

(Read more: Art is the next gold: Novogratz)

If Mr. Loeb chooses to take a combative stance with the Sotheby's board, it will not be the first time the company has had to contend with a large shareholder.

Nearly a decade ago, the New York money manager Ronald Baron questioned the independence of Sotheby's board in a filing with the government. At the time, the Justice Department's antitrust division was investigating whether the auction house had conspired with its rival Christie's to fix commissions. Sotheby's pleaded guilty to colluding to fix commission rates in March 2001 and was fined $45 million.