Sony Rejects Media Spinoff Proposal by Third Point LLC
posted Sunday Aug 11, 2013 by Nicholas DiMeo
When Sony's CEO Kaz Hirai took over in April of last year, he immediately said the company would undergo a revival plan that would take some time, but would eventually result in a complete turnaround of the company. Through the year, Sony has seen a few quarters in the black along with a couple of key purchases to boost their portfolio. All of this culminated last month with Daniel Loeb's Third Point LLC hedge fund, Sony's biggest stockholder, suggesting that the company spinoff its media division in order to raise the stock price. After a month of Sony, Hirai, Morgan Stanley and Citi carefully looking over the numbers, the board of directors unanimously decided this week that Sony will not be selling off its media assets into its own entity.
In a letter sent to Daniel Loeb and Third Point LLC, Sony respectfully outlines the reasons why.
Since your first letter on May 14, 2013, the Board of Directors and management team, with the assistance of external financial and legal advisors, have thoroughly considered the merits of your proposal... While we share with you the objectives of increasing profitability and driving shareholder value, after careful review, the Sony Board of Directors has unanimously concluded that continuing to own 100% of our entertainment business is the best path forward and is integral to Sony's strategy. We do, however, expect to increase disclosure regarding Sony's entertainment businesses. We agree this can help market participants analyze their performance and monitor their success.
Hirai also added that removing Sony's media division from the company would not fit in with Sony's new "One Sony" strategy that he has been trying to implement under the revival plan.
We are encouraged by our progress as we continue to execute on our One Sony strategy. We have made many changes during my tenure as CEO, and we are confident that we are on the right path. Sony's entertainment businesses are critical to our corporate strategy and will be important drivers of growth, and I am firmly committed to assuring their growth, to improving their profitability, and to aggressively leveraging their collaboration with our electronics and service businesses. We are determined to pursue sustained growth in profitability and shareholder value, so that we can meet and exceed the expectations of all of our stakeholders.
Hirai seems to be really taking this initiative to heart and is working very hard to make sure that Sony continues to remain a competitor in the industries in which it conducts business. The rejection was made are a lot of conversations and extreme consideration, and I honestly feel that their media properties have the most amount of buzz around them, along with revenue. I'd want to keep that as part of One Sony as well. Third Point, however, isn't accepting Sony's rejection. In what looks to be something out of a high school crush, the hedge fund said in a statement,
Third Point looks forward to an ongoing dialogue with management and intends to explore further options to create value for Sony shareholders.
We'll see what that means for Sony as time goes on, but at least for now, Sony said no. And no means no.