Hedge fund buys 6.9pc of Sony, proposes to spin off film division

Third Point proposes firm spin off up to 20 per cent of its music and film assets

PUBLISHED : Tuesday, 18 June, 2013, 1:24pm
UPDATED : Wednesday, 19 June, 2013, 3:52am

Third Point, the hedge fund controlled by billionaire Daniel Loeb, has raised its stake in Sony to 6.9 per cent as it seeks talks with the board on a proposed spinoff of part of its entertainment business.

Funds controlled by Third Point now own 70 million shares through direct ownership and cash-settled swaps, according to a June 17 letter from the investor to Sony chief executive Kazuo Hirai.

Hirai and Sony's board are discussing Third Point's proposal to sell as much as 20 per cent of its music and film assets in an initial public offering, so that it can focus on reviving its consumer electronics earnings.

Loeb offered to meet with Sony directors and bankers and said the company was regaining its edge, citing the new PlayStation 4 game console and Xperia smartphones.

"It's positive for Sony; Loeb is acknowledging Sony's potential," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management in Tokyo. "It would be good for shareholders if Sony spins off its entertainment unit as it would boost its value."

Spokeswomen for Sony and Third Point declined to comment.

Sony shares rose 4.4 per cent in Tokyo yesterday. The stock has more than doubled this year.

Sony's share of Japan's smartphone market rose to a three-year high this month, widening its lead over Apple, as new Xperia models and a discount programme from the nation's largest wireless carrier, NTT DoCoMo, helped stoke sales.

The company unveiled its new PS4 this month, with orders for the new console running ahead of internal projections, Andrew House, president and group chief executive of Sony Computer Entertainment, said last week in an interview.

Earlier this month, in a face-off between Microsoft's Xbox One and the PlayStation at the annual E3 video-game conference in Los Angeles, Sony won the first round by pricing its machine US$100 below Microsoft's and offering more flexibility about how to play, trade and sell games.

"Sony appears to be regaining its competitive edge," Loeb said in the letter. "Given our large stake, we reiterate our offer to serve on Sony's board of directors."

Loeb said a spinoff of the entertainment assets should include a "semi-independent governance structure" with Hirai serving as chairman of both companies. In a May 14 letter, Third Point said it held 64 million Sony shares.

Sony is working with Morgan Stanley and Citigroup as it considers the Loeb plan, people familiar with the matter said last month.

The electronics and entertainment businesses should be managed together because that would allow the company to co-ordinate the release of ultra-high resolution televisions with compatible movies, Hirai told the Nikkei newspaper on June 14. He also promised to increase sales 5 per cent to 10 per cent a year.