Sony Corp. said Wednesday that its board of directors will consider a proposal by a U.S. hedge fund to put on the stock market a minority stake in Sony’s entertainment division, retracting an earlier statement that they won’t be put up for sale.
Daniel Loeb, the hedge fund billionaire who heads the U.S.-based Third Point LLC — Sony’s major stakeholder — suggested last week that the firm take its entertainment units public to free up capital for its electronics business.
Sony Chief Executive Officer Kazuo Hirai admitted Wednesday that Loeb proposed placing 15 to 20 percent of the entertainment division’s stake on the market, not to separate the entity.
“It is an important proposal from our stakeholder . . . we will discuss this topic thoroughly at the board of directors,” said Hirai, adding he doesn’t know when Sony will make a final decision.
Sony owns entertainment-related firms, including ones that produce music and movies. Loeb suggested that Sony could use the money from selling stakes in them to revive the electronics business.
Sony has plenty of big guns in all phases of entertainment. The movie studio makes the “Spider-Man” and “Smurfs” movies. Hit TV shows include “Breaking Bad” for AMC Networks Inc. In music, the company owns Sony Music Entertainment, home to Alicia Keys and Bruce Springsteen. The Sony/ATV Music Publishing joint venture with the Michael Jackson estate collects royalties on songs by the Beatles and Jackson.
“The entertainment businesses are important contributors to Sony’s growth and are not for sale,” the electronics maker said in a May 14 statement.
Hirai, who started his career at Sony in its music division, has previously said he doesn’t plan to sell the entertainment assets. Rather, he wants to build services linking the company’s electronic devices and TVs to its content, including movies.
Expectations that Sony will take action are driving the stock higher, said Mitsuo Shimizu, an analyst at Iwai Cosmo Holdings Inc.
“Realistically, it’s not clear whether a spinoff will strengthen Sony,” the analyst said.
In addition to raising cash to help turn around the electronics unit, the proposal would provide a more disciplined focus on the entertainment group, Loeb said in a May 14 letter to Hirai.
He has invested $1.1 billion in Sony to become the company’s biggest investor with 6.5 percent of the stock, he said in his letter, and is willing to bet more.
The investor said he would underwrite a rights offering in the entertainment unit that would give shareholders the opportunity to participate. Third Point, which manages $13 billion, would “backstop” the IPO for as much as $2 billion, he said in the letter.
While Sony has been losing money from its electronics business, especially TVs, the entertainment business has been profitable.
Hirai vowed Wednesday to stop the bleeding in the TV business this fiscal year, which would be a first in a decade, and restore its electronics sector.
“Turning the TV business into the black is a goal we must achieve” in fiscal 2013, Hirai said at a news conference as he explained Sony’s management plan for this business year.
Hirai took the helm in April 2012 and Sony subsequently saw a net profit for the first time in five years.
But “unfortunately, we couldn’t make the electronics business profitable” he said of the ¥134.4 billion in red ink for that component.
Although Sony’s TV business has lost money for nine business years in a row, Hirai said the firm reduced the loss from ¥207.5 billion in fiscal 2011 to ¥69.6 billion, stressing that it is now ready to make a profit this year through producing competitive products and streamlining.
He also said the mobile segment is the key to reviving the electronics division as smartphones continue to grow worldwide, while game and digital imaging are also crucial segments.
Information from Bloomberg added