Left: John Vogelstein of Warburg Pincus LLC, and Daniel S. Loeb
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/By Clive Minchom/
Third Point, the hedge fund led by billionaire Daniel Loeb, is upping the ante on currently-struggling Japanese blue-chip company Sony Corp, and has increased a stake it has taken in Sony’s shares while pushing for talks with their Board on his proposed initial public offering of the company’s entertainment business.
Funds controlled by Third Point own 70 million shares through direct ownership and cash-settled swaps, according to a June 17th letter from the investor to Sony Chief Executive Officer Kazui Hirai obtained by Bloomberg News. This is equivalent to about 6.9 percent of the Tokyo-based company’s issued shares.
Directors of Sony, which holds its annual shareholder meeting June 20, must now therefore discuss Third Point’s proposal to spin off as much as 20 percent of its music and movie assets so the company can focus on reviving consumer electronics earnings. Loeb, whose fund increased its stake by 9.4 percent, said the company is regaining its edge with the new PlayStation 4 game console and Xperia smartphones.
“It’s positive for Sony; Loeb is acknowledging Sony’s potential, ” said Mitsushige Akino to Bloomberg News; – he is Chief Fund Manager at Ichiyoshi Asset Management Co. in Tokyo. “It would be good for shareholders if Sony spins off its entertainment unit as it would boost its value.”
Mami Imada, a Tokyo-based spokeswoman for Sony, said the company has received the letter and is considering the proposal. Elissa Doyle, a spokeswoman for New York-based Third Point, declined to comment. Jim Kennedy, a U.S.-based spokesman for Sony Entertainment, said he had no immediate comment.
While lots of people would love to bid for Sony’s entertainment assets it would be a dagger through the heart of the company. Moreover, corporate Japan may simply end up circling the wagons to fend off outsiders, something they have been very good at for many decades; so it is far from a slam dunk and for Sony fending off Third Point may seem to them a little like swatting flies. The depth of investor dissatisfaction with Sony runs deep however after years of poor performance, so even in Japan one can never be quite sure how events will unfold.
Shareholders at Sony’s June 20th meeting will also be voting on Sony’s nomination of three new board directors, including two former Apple executives, to replace four that will retire.
The electronics and entertainment businesses should be managed together because that would allow the company to coordinate the release of ultra-high resolution TVs with compatible movies, Sony CEO Hirai said in an interview with the Nikkei newspaper published June 14th. Hirai promised to increase sales 5 percent to 10 percent a year by expanding TV programming, cable channels and “other platforms.”
“The entertainment arm is one of our three core pillars, along with electronics and the financial arm, so the hardware and software businesses are managed in an integrated manner, ” Hirai told Nikkei.
For his part, according to the New York Times Mr. Loeb praised Sony’s responses to his calls for change, noting the company’s previous hiring of banks to weigh the partial spinoff of the entertainment business, and he has suggested that Kazuo Hirai, Sony’s chief executive, should serve as the chairman of both companies.
But giving the entertainment business its own board would, in Mr. Loeb’s estimation, provide better oversight over revival efforts and spending plans.
Since going public with his calls for change at Sony, Mr. Loeb has kept a polite, even deferential tone. But his latest letter is slightly more urgent.
“Shareholders should not have to wait any longer, ” Mr. Loeb wrote. “We support efforts to create an integrated Sony ecosystem but must not forget that today the company’s most valuable untapped synergies lie within entertainment itself.”
About Daniel Loeb
Loeb was raised in a Jewish family in the Los Angeles area, one of three children of Ronald and Clare Spark Loeb. His father was a partner at the Los Angeles law firm of Irell & Manella LLP. His mother is a historian. Loeb’s great-aunt Ruth Handler created the Barbie doll and co-founded Mattel Inc. with her husband.
He attended Palisades Charter High School commonly known as “Pali High” in the Pacific Palisades neighborhood of LA. Later, he attended the University of California at Berkley for two years before subsequently graduating from Columbia University in New York with a degree in Economics.
For his first jobs in the financial industry he worked at Citicorp and Warburg Pincus before going on to found his own hedge fund Third Point in 1995. Today Third Point has about US$13 billion of funds under management.
According to Forbes, Third Point had a fabulous year in 2012. They state his flagship hedge fund beat the U.S. stock market, which most hedge funds failed to do in 2012, with a 21.2% net return.
Known for firing off harsh letters lambasting corporate executives and board members of companies he is targeting, in 2012 Loeb led a successful effort to dislodge Scott Thompson from the CEO position at Yahoo and replace him with Marissa Mayer. He also joined Yahoo’s board of directors. He serves as the chairman of the board of Success Academies Charter Schools in Brooklyn, helps lead Students First New York., and is a trustee of Prep for Prep. Beyond education, he is also a trustee of the US Olympic Foundation, Mt. Sinai Hospital, the Manhattan Institute and the LA MOCA.