Sony's board is likely to reject a US hedge fund's proposal to spin off part of its profitable entertainment arm, a report said on August 01. Japan's leading Nikkei business daily said the company's directors discussed the idea on July 31 and were leaning towards turning the proposal down after reviewing a financial advisor report on the deal. Some directors argued that Sony can compete better as a whole firm instead of hiving off part of the entertainment division, the Nikkei said without citing sources.
Sony's chief financial officer Masaru Kato on August 01 called the proposal "a very important issue for our board" but declined to elaborate on the status of discussions. "We want to spend time and study it," he told reporters, after the firm said it had swung to a $35 million net profit in the three months to June.
"But we would like to refrain from discussing it publicly." US billionaire Daniel Loeb, who says his hedge fund Third Point has amassed the largest stake in Sony, called on the firm's executives to spin off up to 20 percent of the entertainment unit, which includes a music label and Hollywood movie studio.
Loeb, known for his aggressive style in stoking change at target firms, initially took a softer approach by praising Sony chief Kazuo Hirai's bid to turn the company around after years of losses. The billionaire's polite letters to Sony's chief were widely seen as catering to Japan's corporate culture, where vocal shareholder activism is rare.
"But it's not a favourable time for Third Point as Sony appears to be on track to a recovery," Dan Matsuda, a corporate lawyer at Jones Day in Tokyo, told AFP. And there have been a string of failed bids by foreign investors trying to force change at Japanese firms. "Generally speaking, Japanese companies are still defensive toward proposals from foreign investors," Matsuda said.
"But we would like to refrain from discussing it publicly." US billionaire Daniel Loeb, who says his hedge fund Third Point has amassed the largest stake in Sony, called on the firm's executives to spin off up to 20 percent of the entertainment unit, which includes a music label and Hollywood movie studio.
Loeb, known for his aggressive style in stoking change at target firms, initially took a softer approach by praising Sony chief Kazuo Hirai's bid to turn the company around after years of losses. The billionaire's polite letters to Sony's chief were widely seen as catering to Japan's corporate culture, where vocal shareholder activism is rare.
"But it's not a favourable time for Third Point as Sony appears to be on track to a recovery," Dan Matsuda, a corporate lawyer at Jones Day in Tokyo, told AFP. And there have been a string of failed bids by foreign investors trying to force change at Japanese firms. "Generally speaking, Japanese companies are still defensive toward proposals from foreign investors," Matsuda said.
"They have maintained this culture of being allergic to shareholders' voices," he continued. "Now, overseas investors are reconsidering their strategy and Third Point's conciliatory approach is an example of that." Loeb had argued the spin-off would make the entertainment unit's managers more accountable and help improve profitability.
In a quarterly letter to investors this week, he struck a harder tone, saying corporate culture in the subsidiary was "characterised by a complete lack of accountability and poor financial controls".
The division "remains poorly managed, with a famously bloated corporate structure, generous perk packages, high salaries for underperforming senior executives, and marketing budgets that do not seem to be in line with any sense of return on capital invested," Loeb wrote. He added that "drastic - rather than incremental - action is required".
Hirai has resisted previous calls to break up the electronics giant. In June, he told an annual investor meeting in Tokyo that the company's board was studying the plan from "all sorts of angles", but said it would not be rushed into a decision.
(AFP 2013)
In a quarterly letter to investors this week, he struck a harder tone, saying corporate culture in the subsidiary was "characterised by a complete lack of accountability and poor financial controls".
The division "remains poorly managed, with a famously bloated corporate structure, generous perk packages, high salaries for underperforming senior executives, and marketing budgets that do not seem to be in line with any sense of return on capital invested," Loeb wrote. He added that "drastic - rather than incremental - action is required".
Hirai has resisted previous calls to break up the electronics giant. In June, he told an annual investor meeting in Tokyo that the company's board was studying the plan from "all sorts of angles", but said it would not be rushed into a decision.
(AFP 2013)
