Sony Rejects Proposed Spin Off of Entertainment Unit

TOKYO: Sony Corporation has shot down a proposal from activist shareholder Daniel Loeb to spin off part of its entertainment business.

Loeb’s Third Point hedge fund previously proposed that Sony sell as much as one-fifth of its entertainment arm, including movies, TV and music, to free up cash to help revive the electronics business. Sony’s board of directors has unanimously decided that continuing to own 100 percent of its entertainment business is the best way forward.

In a letter to Third Point, Sony set out a number of reasons for its decision. It said that demand for content is increasing its value in a media environment that is characterized by emerging distribution platforms and the proliferation of mobile devices and access to broadband. "Sony believes its entertainment businesses will increasingly benefit from these trends, and the company’s shareholders will benefit from owning all, rather than a part, of these valuable assets," the letter stated.

It also said that having full control of its entertainment business drives collaboration, facilitates synergies and allows the company to be more nimble. "Sony believes that the opportunities for collaboration among Sony’s businesses are numerous and increasing, and a rights or public offering would create the need for otherwise unnecessary and burdensome arm’s length inter-company relationships as a result of minority shareholder rights, thereby limiting Sony’s control and strategic flexibility," the company said.

"We are encouraged by our progress as we continue to execute on our One Sony strategy," said Kazuo Hirai, the president and CEO of Sony. "We have made many changes during my tenure as CEO, and we are confident that we are on the right path. Sony’s entertainment businesses are critical to our corporate strategy and will be important drivers of growth, and I am firmly committed to assuring their growth, to improving their profitability, and to aggressively leveraging their collaboration with our electronics and service businesses. We are determined to pursue sustained growth in profitability and shareholder value, so that we can meet and exceed the expectations of all of our stakeholders."