TOKYO — The U.S. hedge-fund manager renowned for shaking up Yahoo has set his sights on Sony, proposing that the Japanese electronics giant spin off up to 20 percent of its movie, TV and music division and use the money to strengthen its ailing device-manufacturing unit. Sony rejected the plan, but analysts latched onto the idea as a way for Sony to unlock hidden value.
Sony’s U.S.-traded shares were up $1.61, or 8.5 percent, to $20.50 in Tuesday afternoon trading after hitting a 52-week high of $22.22 earlier in the day.
In a May 14 letter to Sony President Kazuo Hirai, first published in The New York Times, Third Point CEO Daniel Loeb suggests Sony take 15 to 20 percent of the entertainment unit public by offering current Sony shareholders the opportunity to buy shares in it.
Loeb said that would allow the Japanese maker of PlayStation game machines and Bravia TV sets to fund improvements to its battered electronics operations and provide existing shareholders with a way to own one of Sony’s most profitable businesses more directly.
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Sony replied in a statement Tuesday that its entertainment business is not for sale, and stressed it is trying to strengthen both that division and its electronics operations.
“As president and CEO Kazuo Hirai has said repeatedly, the entertainment businesses are important contributors to Sony’s growth and are not for sale,” Sony said. “We look forward to continuing constructive dialogue with our shareholders as we pursue our strategy.”
Despite Sony’s rebuff, analysts hailed the idea.
Pivotal Research Group analyst Brian Wieser said that becoming a separate company would allow Sony’s entertainment division to grow and become more profitable. It would also focus investor attention on its assets, which would take on new value as a potential acquisition target for media companies like CBS Corp.
CBS spokesman Dana McClintock declined to comment.
Besides distributing blockbuster movies like the James Bond hit “Skyfall,” Sony’s entertainment arm makes popular TV shows such as “Community” for NBC and “Breaking Bad” for AMC. Notable Sony Music artists include Beyonce, Adele, Bob Dylan and Kenny Chesney. Wieser said Sony operates 124 pay TV channels in more than 159 countries.
“Buried inside of a bigger company, Sony has not been able to highlight the valuable businesses,” Wieser wrote in a research note Tuesday.
Loeb’s letter said that over 40 percent of Sony’s enterprise value is tied up in its entertainment assets, but they are underperforming compared to their peers.
Sony’s electronics business has been ailing, particularly its TV division, which has lost money for nine straight years.
Loeb’s letter was also well timed. Sony’s corporate strategy meeting is set for May 22. In it, he pointed to the “Abenomics” monetary policies of Prime Minister Shinzo Abe, who took office last year, which have buoyed Tokyo stocks and brought the yen down.
“Sony stands at the crossroads of compelling corporate opportunity and massive Japanese economic reform. Under Prime Minister Abe’s leadership, Japan can regain its position as one of the world’s pre-eminent economic powerhouses and manufacturing engines,” he said.