Sony spin-off plan off agenda but looms over shareholder meet

Wed Jun 19, 2013 7:28pm EDT
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By Mari Saito

TOKYO (Reuters) - A proposal by Sony Corp's (6758.T: Quote) top investor to partially spin off the Japanese company's lucrative entertainment business will be the elephant in the room at an annual shareholders meeting on Thursday.

Daniel Loeb, who heads New York-based hedge fund Third Point, will miss the gathering and those attending will not consider his suggestion, sources familiar with the matter said.

They gave no reason why Loeb would not attend. But he is expected to keep pressing his case with Sony's board and, if no action is taken, will have the right as a major shareholder to eventually call an extraordinary shareholders' meeting.

Loeb wants Sony to spin off as much as one-fifth of the electronics empire's profitable entertainment unit and use the proceeds to strengthen its struggling hardware division.

His suggestion, likely to stay on the radar for months, strikes at the heart of whether Sony remains both a consumer electronics maker and a provider of music, movies and TV programs.

Sony's strategy to merge content and hardware in a unified company, which kicked off 24 years ago with the purchase of Columbia Pictures, has failed to deliver the synergies it promised, Loeb argued this week in his second letter addressed to Sony CEO Kazuo Hirai.

Loeb's call to awaken Sony's "sleeping giant" - an entertainment business that generates 37 percent of its operating profit with popular artists such as Beyonce and hit franchises like "Spider Man" - may be compelling for shareholders but the company board is unlikely to reach a decision quickly, analysts have said.

With his proposal, Loeb is trying to repeat his success last year at Yahoo Inc YHOO.O, which he took on in a lengthy and eventually bitter proxy fight that triggered a boardroom shakeout.   Continued...

Sony Corp's President and Chief Executive Officer Kazuo Hirai attends the Sony Corporate Strategy Meeting at the company's headquarters in Tokyo May 22, 2013. REUTERS/Toru Hanai