Sony under pressure to spin off entertainment unit

Hedge fund Third Point, a major Sony stockholder, is pushing the company to separate its entertainment arm into its own company.

Screenshot by Lance Whitney/CNET

Sony is once again being squeezed by one of its biggest investors to split itself up by spinning off its entertainment division.

Third Point hedge fund founder Daniel Loeb sent a letter on Tuesday to Sony CEO Kazuo Hirai urging him to set up a semi-independent board to run a spun-off and public entertainment company, Reuters reported. Loeb recently upped his fund's investment in Sony to 70 million shares, or almost 7 percent of the company, a stake worth around $1.4 billion.

Loeb has argued that Sony has been unable to successfully run its entertainment division, which includes Sony Pictures and Sony Music. In his letter, the hedge fund manager said that the unit lacks the "discipline and accountability" of rival companies, 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," Loeb added.

Specifically, Loeb wants Sony to sell off 15 to 20 percent of its entertainment division as part of an initial public offering. Such a move could add as much as 60 percent to Sony's stock price, he said, according to Reuters. Loeb further wants Hirai to serve as board chairman for both Sony's electronics company and the spun-off entertainment unit.

Responding to a request for comment, a Sony spokesperson told CNET that Sony's board of directors will review Third Point's proposal but won't comment on the specifics of that proposal. The spokesperson also sent CNET the following statement:

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 and not for sale. We look forward to continuing constructive dialogue with our shareholders as we pursue our strategy.

Last month, Loeb urged Hirai to spin off the entertainment business in an effort to focus more on its electronics division. The billionaire investor said he's also looking for a seat on Sony's board.

Updated 10:10 a.m. PT with response from Sony.

About the author

Journalist, software trainer, and Web developer Lance Whitney writes columns and reviews for CNET, Computer Shopper, Microsoft TechNet, and other technology sites. His first book, "Windows 8 Five Minutes at a Time," was published by Wiley & Sons in November 2012.

 

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