Sony Rejects Loeb Push to Sell for Entertainment IPO
By Cliff Edwards and Mariko Yasu - Aug 5, 2013
Sony Corp. (6758) rejected billionaire Daniel Loeb’s call to sell a portion of its entertainment business, saying 100 percent ownership of the film and music units is crucial to the company’s success.
The board decision was unanimous, Tokyo-based Sony said today in an e-mailed statement. The company will begin providing additional disclosure about the entertainment business starting with the current second quarter.
Chief Executive Officer Kazuo Hirai is backing a unified business that spans the production of TVs and mobile devices that can combine with music and film content to drive earnings after years of losses from electronics. Loeb’s Third Point LLC built a 6.9 percent stake in Sony and pushed the board to sell as much as 20 percent of its entertainment assets in an initial public offering.
“In the last 15-20 years that they’ve owned those businesses, they’ve yet to show any meaningful synergy with electronics,” said Daniel Ernst, an analyst at Hudson Square Research in New York, who has a buy rating on the shares. “The beauty of the entertainment spin plan was that it wouldn’t stop them from keeping trying.”
Neither Loeb nor Elissa Doyle, a managing director of the billionaire’s Third Point LLC, immediately responded to e-mail messages seeking comment.
Sony fell as much as 3.4 percent in Tokyo before trading 2.6 percent lower at 2,082 yen at 9:05 a.m. The stock has more than doubled this year on optimism that Hirai can turn around the company’s struggling electronics business.
Growth Drivers “Sony’s entertainment businesses are critical to our corporate strategy and will be important drivers of growth,” Hirai said in the statement. “I am firmly committed to assuring their growth, to improving their profitability, and to aggressively leveraging their collaboration with our electronics and service businesses.”
The new disclosures will include quarterly revenue figures for unspecified categories within the movie and music units and other metrics that would help investors calculate adjusted earnings before items, Hirai said.
Loeb said in May that an IPO of entertainment would improve the performance of Sony’s film studios and raise cash to revive electronics.
‘One Sony’ “President Hirai has been emphasizing his ‘One Sony’ policy and saying the company’s entertainment operation and electronics operation cannot be separated,” said Koki Shiraishi, a Tokyo-based analyst at SMBC Nikko Securities Inc. “So I think this investor proposal issue is mostly over with Sony’s response today.”
Sony last week raised its full-year sales forecast as a weaker yen boosts the value of exports as the company gets almost 70 percent of revenue from overseas. The improved outlook came even as it cut expected shipments of TVs, digital cameras and personal computers as it tries to match Samsung Electronics Co. (005930)
In U.S. dollar terms, sales for Sony’s pictures unit fell 16 percent in the June quarter. After topping the U.S. box-office last year, Sony’s films have fallen to sixth in 2013 after flops “White House Down” and “After Earth,” starring Will Smith.
Film Flops The box-office duds prompted Loeb to devote more than half of Third Point’s quarterly investor newsletter to Sony, as he slammed the flops and “high salaries for underperforming senior executives.” He said Sony’s entertainment profit margins lag behind peers, and the unit needs closer supervision amid a lack of franchises and bloated costs.
A combined entertainment unit, including music and pictures, would be the second-biggest source of earnings based on the company’s June quarter results. Sony’s largest business by earnings is financial services.
Hirai is preparing to release the PlayStation 4 console this year to drive game earnings as consumers migrate to playing games on mobile devices from Samsung and Apple Inc.
Loeb praised Sony’s rollout of the PS4, which is due to be released for the Christmas shopping season starting at $399.
To contact the reporters on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net; Mariko Yasu in Tokyo at myasu@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net |
