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Daniel Loeb wants Sony to spin off entertainment

Staff writer ▼ | May 16, 2013
Daniel Loeb wants Sony to spin off its entertainment businesses, including its movie and TV studio and its music business, to boost company profitability.
Daniel Loeb
Daniel LoebDaniel Loeb wants Sony to spin off its entertainment businesses, including its movie and TV studio and its music business, to boost company profitability.


Daniel Loeb, the leader of the hedge fund Third Point, delivered a letter at a meeting with Sony chief executive officer Kazuo Hirai Tuesday in Tokyo, outlining the ways he believes the company could be improved.

Mr. Loeb lauded Hirai's leadership but called for an initial public offering of a 15% to 20% stake in Sony Entertainment to let it "thrive independently with the support of the Sony parent company."

The move, Mr. Loeb added, would also raise capital that could be spent to revitalize Sony Electronics to be better able to compete with South Korean and Taiwanese competitors. Shares of Sony wentmore than 16% after the news about Mr. Loeb's move.

"To maximize Sony's overall success, we believe the company should change the structure of its ownership of Sony Entertainment. Doing so will strengthen Sony by reducing its burdensome debt, thereby providing additional resources and capital to focus on revitalizing the resurgent Sony Electronics," wrote Mr. Loeb, asserting that the four funds he runs under the Third Point umbrella collectively are the largest shareholder of Sony with a 6.5% stake.

Mr. Loeb's fund owns 64 million Sony shares valued at $1.1 billion. To give current Sony shareholders priority for shares of a Sony Entertainment spinoff, he suggested the company offer subscription rights to them. To ensure the success of the subscription-rights offering, Third Point, which manages $13 billion, was willing to "backstop" the initial public offering - guaranteeing to buy unsold shares - up to $1.5 billion to $2 billion.


 

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