A major hedge fund investor has lobbed a hand grenade into the laps of Sony management to convince the struggling company to launch an initial public offering of its entertainment division.
Daniel Loeb’s Third Point Fund has sent a letter written by its CEO to Sony Chief Executive Kazuo Hirai, urging Sony to sell a 15% to 20% stake in its entertainment arm, which comprises the company’s movie and music businesses.
Currently, Sony’s consumer electronics business is suffering, with some observers saying the company should concentrate on movies and entertainment, instead of trying to resurrect their struggling CE business, which is set to get a boost with the launch of a new Sony PS4.
Daniel Loeb’s firm has boosted its stake in Sony, ratcheting up a campaign to persuade the Japanese electronics company to take action to restructure their operation.
In his letter, Loeb also disclosed that Third Point has added some five million shares to its Sony stake, for a total of 70 million shares, or 6.9% of the company. Sony responded, claiming its board would conduct a review of the proposal, but declining to comment on specifics.
“Sony welcomes investment in the company,” the statement added. “We are focused on creating shareholder value by executing on our plan to revitalize and grow the electronics business, while further strengthening the entertainment and financial service businesses which generate stable profit.”
The Wall Street Journal claimed that Mr Loeb, whose Sony stake now amounts to roughly $1.4 billion and makes Third Point one of the company’s largest shareholders, is seeking to ride a wave of potential change in Japan’s traditionally staid corporate sector and in its wider economy.<?xml:namespace prefix = “o” />
In early Tokyo trading Tuesday, Sony shares rose 4% to 2,028 yen ($21.56).
Loeb’s letter praises recent efforts to revitalize Sony, whose shares, in spite of nearly doubling in the past year, are still down. The letter cites the favourable reception for Sony’s coming PlayStation 4 and the performance of its Xperia smartphone in Japan as signs of recent progress.
Mr. Loeb has argued in the past that Sony’s entertainment arm is worth around $10 billion and that an IPO could raise as much as $2 billion. The capital could help the operation make acquisitions and seize other opportunities, he argues.
