Activist Investor Raises Sony Stake, Continues Push for Entertainment IPO

12:31 AM PST 06/18/2013 by Georg Szalai

Daniel Loeb, in his second letter to CEO Kaz Hirai, says that the conglomerate's film and music businesses lack the "discipline and accountability" of many of its peers.

Activist investor Daniel Loeb's hedge fund Third Point has slightly increased its stake in Sony Corp. as it continues to push for an IPO of the conglomerate's entertainment business.

Loeb has sent a second letter to Sony CEO Kaz Hirai, reiterating that Sony should sell a stake of 15-20 percent in its film and music businesses.

In the letter, he said that Third Point has added five million shares to its Sony stake, raising it from 6.5 percent to 6.9 percent. The firm is one of the company's largest shareholders.

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Loeb's letter argues that Sony's entertainment business lacks the "discipline and accountability" of many of its peers, according to the Wall Street Journal. "In light of this track record, it seems difficult to argue that entertainment would not be strengthened by the transparency that comes with public reporting, an active media analyst community evaluating financial performance regularly and an expert board with strongly aligned incentives," the letter concludes.

Added Loeb: "Although we have not yet been asked to discuss our ideas with the company's investment bankers or board of directors, we would like to do so promptly."

Loeb's second letter also reiterated his previous offer to join Sony's board. And he added a recommendation that Hirai offer an IPO serve as chairman of both the electronics business and the newly public entertainment company.

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In a statement, Sony reiterated that its board would review the Loeb proposal. 

The statement continued: "Sony welcomes investment in the company. 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. As president and CEO Kazuo Hirai has said repeatedly, the entertainment businesses are important contributors to Sony's growth. We look forward to continuing constructive dialog with our shareholders as we pursue our strategy."

Loeb, in his second letter to Hirai, also praised the management team's recent efforts to revitalize Sony. For example, he lauded the favorable reception of Sony's upcoming PlayStation 4.

Third Point has suggested that Sony's entertainment operations could be worth about $10 billion, with an IPO possibly raising as much as $2 billion. That money could go toward acquisitions and other investments.

Gavin Blair contributed to this report. 


 

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