Sony shares rocketed yesterday after a US hedge fund called for the partial sell-off of its entertainment unit, in a rare bid by a major foreign shareholder to penetrate Japan’s staid corporate culture.
The Tokyo-listed stock closed 10.38 percent higher at ￥2,072, capping a big turnaround since last year when it dropped below ￥1,000 for the first time since the era of the portable Walkman music player.
Billionaire Daniel Loeb, who says his firm Third Point is now Sony’s largest investor through direct and indirect holdings, proposed selling off as much as 20 percent of the Japanese giant’s entertainment arm, which includes profitable movie and music divisions.
Loeb — an outspoken shareholder activist known for his aggressive style in trying to force change at targeted firms — said he supported chief executive Kazuo Hirai’s bid to shake up one of Japan Inc’s best-known names.
“Since taking the helm as chief executive officer [last year], your stated commitment to reinvigorating the company has given us hope that Sony is entering a new era,” Loeb said in a letter to Hirai dated on Tuesday.
However, “for Sony to change, Sony must focus.”
The call comes as foreign investors take a renewed interest in Japan with Tokyo’s pledge to stoke the country’s long-stagnant economy helping to send the benchmark Nikkei 225 index soaring to more than five-year highs.
Last week, Sony reported its first annual net profit in five years, although it was largely driven by a weakening of the yen and a string of asset sales, including unloading its Manhattan headquarters.
Hirai has launched what he called an “urgent” restructuring plan, including thousands of job cuts, as Sony continued to pile up losses in its ailing TV and consumer electronics units.
Sony and domestic rivals Sharp and Panasonic have struggled in the low-margin TV business against foreign rivals, while slowing demand overseas and potentially strategic mistakes — such as coming late to the lucrative smartphone market — also battered their finances.
Still, Japan’s electronics giants have been wary about slicing up businesses that encompass a vast range of consumer products.
Loeb wants Sony to float part of its media division, which includes one of Hollywood’s biggest movie studios and a major music label, by distributing shares to those who already have holdings in the parent company. The offering would act as an incentive to bring up the unit’s lagging profit margins, he said, adding that the “under performance would be remedied by a more disciplined management approach to Sony Entertainment.”
While such action is common in the US, it is rare for a foreign shareholder to have success in bringing about change at a Japanese firm.
“I think it’s unlikely Sony will act on Third Point’s request,” said Seiichi Suzuki, analyst at Tokai Tokyo Securities.
“Generally speaking, shareholders and companies in Japan share similar values in terms of seeking long-term profits from their mainstay businesses over the short-term benefits of a jump in the share price,” he said.