US hedge fund calls for Sony Entertainment spin-off

Billionaire investor Daniel Loeb offers to support IPO

Investor Daniel Loeb said the Third Point hedge fund was willing to put up €1.5 billion to support an initial public offering of up to a fifth of Sony’s entertainment arm. Photograph: Reuters/Steve Marcus

Investor Daniel Loeb said the Third Point hedge fund was willing to put up €1.5 billion to support an initial public offering of up to a fifth of Sony’s entertainment arm. Photograph: Reuters/Steve Marcus

 

Billionaire hedge fund investor Daniel Loeb has called on Sony Corporation to spin off its lucrative entertainment arm, setting the stage for a clash between his activist Wall Street fund and management at the Japanese electronics maker.

Loeb said his Third Point hedge fund had accumulated a little more than 6 per cent of Sony’s shares – a stake worth €850 million – making it the largest stakeholder in the inventor of the Walkman portable music player and Trinitron TV.

In a letter Loeb personally delivered to Kazuo Hirai chief executive at Sony’s headquarters, the fund manager said Third Point was willing to put up another 200 billion yen (€1.5 billion) to support an initial public offering of up to a fifth of the entertainment arm, which includes one of Hollywood’s top film studios and a leading music label.

Loeb (51) is one of the best-known figures in the secretive hedge fund industry, with a record of clashing with corporate executives over strategy, including engineering a successful boardroom shake-up at Yahoo Inc last year.

In his letter, Loeb endorsed Hirai’s attempts to revive Sony but said the problems of the company’s electronics business distracted from the value of US-based Sony Entertainment, an asset he called a “hidden gem”.

While Sony has sold off real estate and other assets to cover losses on consumer electronics, Hirai sees the entertainment business as core to the company’s long-held vision of marrying content and hardware.

“The entertainment businesses are important contributors to Sony’s growth and are not for sale,” Sony said in response to Loeb’s proposal. “We look forward to continuing constructive dialogue with our shareholders as we pursue our strategy.”

Hirai, a 52-year-old Sony veteran who started his career in the music business, is due to give an update on his strategy for the company at a briefing in Tokyo on May 22nd.

Sony shares have already doubled this year amid a rally in Japanese shares as foreign investors bet economic policies of prime minister Shinzo Abe will pull the economy out of a two-decade slump.

Loeb cited the hopes for economic reforms raised by Abe in making his case for change at Sony.– (Reuters)