Third Point's Dan Loeb to Sotheby's CEO: Leave!

Pen and Book, Write

Dan Loeb's poison pen is as toxic as ever.

The head of activist hedge fund firm Third Point wrote a scathing letter to the chairman and chief executive of Sotheby's Wednesday, saying the art auction and sales company "is like an old master painting in desperate need of restoration."

Loeb said the nearly $14 billion Third Point is now Sotheby's largest shareholder with 9.3 percent of outstanding shares.

"We are troubled by the Company's chronically weak operating margins and deteriorating competitive position relative to Christie's, as evidenced by each of the Contemporary and Modern art evening sales over the last several years," Loeb wrote. "We are not persuaded by management's explanation that Sotheby's lower market share is due to uneconomic and predatory behavior by Christie's to secure major works."

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The letter, obtained by, calls for CEO William Ruprecht to be replaced.

"While you were an able caretaker of Sotheby's during times of crisis, you have not shown the innovation or inspiration the Company sorely needs to play offense today," Loeb wrote, also calling for the roles of CEO and chairman to be separated.

"Sotheby's requires a CEO with sufficient knowledge of the global art markets to make critical decisions, who can move seamlessly around the globe building the business and strengthening client relationships. Respectfully, we do not see evidence that you are the right person to repair the Company and drive its growth in today's dynamic global art market."

A spokeswoman for Third Point, Elissa Doyle, declined to comment beyond the letter. A spokeswoman for Sotheby's did not immediately respond to a request for comment.

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Loeb said that he is willing to join the company's board to help recruit new directors and change the company's direction.

Third Point's proposed fixes include revamping auctions, private and Internet sales; expanding Sotheby's global presence; and exploiting the Sotheby's brand through affiliated businesses.

"Sotheby's can also use its unique position and potential excess capital to judiciously take principal positions in works of art when doing so would not conflict with its clients' interests," Loeb added.

Third Point is having another big year. The Third Point Offshore Fund rose 2.6 percent in September and is up 18.0 percent year to date,according to an investor update. The net annualized return since inception in December 1996 is a lofty 17.9%.

-By CNBC's Lawrence Delevingne. Follow him on Twitter @ldelevingne .

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