NEW YORK – U.S. activist hedge fund Third Point LLC expressed frustration Thursday over Sony Corp.’s decision to stick with the status quo and turn down a proposal to spin off its lucrative semiconductor business.
“It is difficult for us to imagine that a company of Sony’s size and complexity could not find a single concrete action to improve its business and valuation,” the New York-based fund, run by U.S. investor Daniel Loeb, wrote in a letter to investors. The fund has invested $1.5 billion in Sony.
In June, Third Point proposed that if Sony spun off the semiconductor business and executed on its long-term vision, the new entity could be worth $35 billion within five years.
“We rarely find companies like Sony that have a depressed valuation, high-quality underlying businesses, numerous options for portfolio optimization, and a capable management team,” Third Point wrote on a website entitled “A Stronger Sony.”
“As a standalone public company listed in Japan, Sony Technologies would be a showcase for Japan’s technology capabilities. Rather than just an uncut rough stone buried inside Sony’s portfolio.”
Sony said in September its board had unanimously decided to reject the proposal by Third Point to split the semiconductor segment and list it in Japan in order to focus more on its entertainment sectors of gaming, pictures and music.
At that time, Sony said the chip business, including image sensors used in smartphones and digital cameras, is the “crucial growth driver” for the company.
Sony is the market leader for image sensors used in smartphones and digital cameras.
The chip business generated ¥144 billion ($1.3 billion) in operating profit on ¥879 billion of revenue in the latest fiscal year. That’s similar in size to Analog Devices Inc. and Advanced Micro Devices Inc. — two companies with market values of more than $30 billion.
Despite the rebuff, Third Point said Thursday it will continue “constructive dialogue” with Sony. “Discussions are ongoing, guided by our view that Sony remains one of the most undervalued large capitalization stocks in the world,” the fund added.
A Sony public relations official said Friday in Tokyo, “We will continue to take constructive proposals by shareholders seriously to improve corporate value in the long term.”
In 2013, Third Point urged Sony to sell a stake in its lucrative entertainment business to raise capital and shore up its loss-making electronics business. The proposal was rejected at the time.