Sony Rejects Loeb's Call To Spin-off Entertainment Business

(RTTNews) - Japanese consumer electronics giant Sony Corp. (SON.L, SNE) rejected on Monday activist hedge fund manager Daniel Loeb's proposal to spin-off or sell part of its entertainment division. Loeb's U.S-based hedge fund Third Point LLC had proposed to publicly list a minority 15 to 20 percent stake in Sony Entertainment through a rights offering that will be backstopped by Third Point.

Sony is the maker of the PlayStation game console, Xperia smartphones and Bravia television sets. Third Point is one of Sony's largest investors, with about seven percent stake in it.

In a letter sent to Third Point, Sony noted that its board of directors has voted unanimously to continue to hold the whole of its entertainment businesses, citing that the business is 'fundamental to Sony's success.' The decision was taken after consulting with its financial advisers, who were retained to help evaluate Loeb's proposal.

"We are encouraged by our progress as we continue to execute on our One Sony strategy. We have made many changes during my tenure as CEO, and we are confident that we are on the right path," Sony President and CEO Kazuo Hirai stated in the letter.

Sony added that the board and management believe it has adequate capital resources to fund its business plans rather than going for a rights or public offering that is not consistent with its strategy for achieving sustained growth in profitability and shareholder value.

The company said its shareholders will benefit from owning all, rather than a part, of the valuable entertainment assets.

Sony noted in the letter that it expects to begin providing additional disclosures regarding its entertainment businesses for the second quarter of the current fiscal year to help market participants better analyze performance of these businesses.

"Sony's entertainment businesses are critical to our corporate strategy and will be important drivers of growth, and I am firmly committed to assuring their growth, to improving their profitability, and to aggressively leveraging their collaboration with our electronics and service businesses. We are determined to pursue sustained growth in profitability and shareholder value, so that we can meet and exceed the expectations of all of our stakeholders," Hirai added.

In mid-June, Loeb reiterated in a letter to Hirai his call for Sony to sell a 15 to 20 percent stake in Sony Entertainment, which comprises the company's movie and music businesses. He also noted that Sony appeared to be regaining its competitive edge following the debut of the PlayStation 4 and strong sales of Xperia in Japan.

Loeb also revealed in the letter that Third Point has increased its stake in Sony to 70 million shares valued at 136.5 billion yen, or $1.4 billion, saying that it was a sign of increased confidence in the company's direction under the leadership of Sony's President and CEO Kazuo Hirai.

SNE closed Monday's regular trading session at $21.76, up $0.14 or 0.65% on a volume of 1.43 million shares. However, the stock lost $0.56 or 2.57% in after-hours trading.