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Sony to study Loeb's Third Point spinoff proposal

by Andrew Bulkeley  |  Published May 22, 2013 at 1:23 PM

Japan's Sony Corp. said Wednesday it would review a proposal from major shareholder Third Point LLC to list part of its entertainment unit to free up cash to support its unhealthy electronics businesses.

"The proposal is one that affects a main component of Sony's business and our management's strategy so the Sony board will give it thorough consideration before replying," Sony CEO Kazuo Hirai told a press conference.

New York hedge fund Third Point, led by Dan Loeb, has sunk $1.1 billion into a 6.5% Sony stake and hopes its campaign to steer strategy could lead to a windfall. Loeb earlier this month had hand-delivered a letter suggesting Sony could list up to 20% of its entertainment activities, which Loeb sees as an underappreciated jewel, and boost the company's stock price.

Loeb then went on a media blitz to drum up support. The hedge fund even said it was willing to put its money where its mouth is and post up to $2 billion to guarantee the success of the listing.

Investors liked the reaction to Loeb's letter, pushing the shares up 4.9%, or ¥127, to ¥2,290 ($22.27) in afternoon Tokyo trading.

Sony's reaction to Loeb is seen as a test of the new corporate zeitgeist promoted by Japanese Prime Minister Shinzo Abe, who took his post in December. Abe wants to introduce more open-door, Western values to the country's clubby corporate sector and has also launched an aggressive monetary campaign to weaken the yen to promote exports and end deflation.

Hirai appears to agree with Japan's top politician but has only been at the helm since April and is working to absorb the pending departure of four executives from its 15-member board in June.

Hirai made the comments about the Loeb proposal during an annual corporate strategy meeting. Earnings released Wednesday highlighted Sony's conundrum -- its TV and phone businesses are unprofitable while its entertainment business reels in cash by producing such fare as the "Breaking Bad" TV series and "Spider-Man" movies.

The company said it now expects just ¥1.5 trillion in smartphone and tablet sales in the year ending March 31, 2015. That's down from an earlier prediction of ¥1.8 trillion. For the current fiscal year, the conglomerate said it's concentrating on getting the division profitable again.

The Tokyo-based company also expects camera sales to come in at ¥1.3 trillion, down from ¥1.5 trillion, in the year ending March 2015. Overall, the company said it wants ¥8.5 trillion in sales in the 2014-2015 fiscal year, a 25% increase over the ¥6.8 trillion in the year ended March 31, 2013.

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Tags: Breaking Bad | Dan Loeb | Kazuo Hirai | Shinzo Abe | smartphone | Sony Corp. | Spider-Man | tablet | Third Point LLC

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