Japan’s Sony Corp yesterday rejected a proposal from activist shareholder Daniel Loeb to partially spin off its entertainment business, but the billionaire investor vowed to keep talking with the company and explore other options.
Sony said it could still squeeze synergies from its decades-old marriage of content and hardware, and promised more disclosure in its entertainment operations.
Loeb’s Third Point LLC hedge fund has waged a three-month campaign to convince the company to sell as much as one-fifth of its money-making entertainment arm — movies, TV and music — to free up cash to revive its electronics business.
“Sony’s board of directors has unanimously concluded that continuing to own 100 percent of our entertainment business is the best path forward and is integral to Sony’s strategy,” Sony CEO Kazuo Hirai said in a letter to Loeb, which was released by the company.
Loeb had cast his proposal for a public offering of part of Sony’s entertainment business as consistent with Japanese Prime Minister Shinzo Abe’s drive to boost economic growth through structural reform, but a source familiar with the discussions said Sony’s decision reflected worries about listing a subsidiary, not resistance to corporate reform in Japan.
The company does not need the cash from a subsidiary initial public offering, which would have created possible conflicts and cumbersome requirements because of the type of listing, he added.
“I can’t believe this is a statement on Japanese companies not being willing to be flexible,” the source said.
Loeb, who owns about 7 percent of Sony through shares and cash-settled swaps, said he was disappointed with the decision, but acknowledged that Sony was showing a greater commitment to transparency.
He also made it clear that the saga was not over.
“Third Point looks forward to an ongoing dialogue with management and intends to explore further options to create value for Sony shareholders,” the fund said in a statement.
However, sources familiar with the situation were skeptical about the prospects for a proxy fight taken directly to shareholders, given the history of such efforts failing in Japan.
Sony has long been a pillar of Japan Inc and a pioneer in the electronics industry. However, it has lost market share — and its innovative edge — to aggressive foreign rivals such as South Korea’s Samsung Electronics Co and Apple Inc.