Daniel Loeb, CEO of hedge fund, Third Point expects Sony Corporation (NYSE:SNE) (TYO: 6758) to outline its objective to boost the profitability of its entertainment business after the board of directors of the Japanese firm unanimously rejected his proposal to spin off 20 percent of the business unit, according to report from Reuters.
Loeb wants Sony to present specific plans at annual general meeting
Sources close to the hedge fund said that Loeb wants Sony Corporation (NYSE:SNE) (TYO:6758) to present its specific plans to improve the performance of its entertainment unit during the annual general meeting in May 2014. According to them, the hedge fund manager expressed disappointment towards the decision of the board of the Japanese firm, but he was satisfied with its commitment to increase transparency and profits of the entertainment unit. Loeb was also pleased with the recent improvements in the electronic unit of the company.
A related report from Bloomberg indicated that Loeb has no intention to launch a proxy fight against Sony Corporation (NYSE:SNE) (TYO:6758) or to exercise his right to call for a special meeting, according to a person knowledgeable about the issue. The source also said the hedge fund manager might visit Kazuo Hirai, chief executive officer of the Japanese firm over the next few months. In his proposal, Loeb stated his confidence in Hirai’s ability in enhancing the entertainment unit.
In a statement regarding the decision of the board to turn down Loeb’s recommendation, Hirai emphasized that the entertainment unit is integral to the strategy of Sony Corporation (NYSE:SNE) (TYO:6758). According to him, “a rights or public offering will create the need for otherwise unnecessary and burdensome arms length intercompany relationships.” He said the company is committed to continue to execute its “One Sony Strategy.”
Third Point one of largest shareholders of Sony
Third Point is one of the largest shareholders of Sony Corporation (NYSE:SNE) (TYO:6758) with 70 million shares or 6.9 percent stake worth approximately $1.4 billion. Loeb expects the company to report earnings improvements during its May 2014 annual shareholders meeting.
The stock price of Sony Corporation (NYSE:SNE) (TYO:6758) declined by nearly 5 percent to $20.72 per share on Tuesday at the New York Stock Exchange. Over the past 52-week range, the stock increased in value from its lowest price at $9.57 per share to its highest level at $23.38 per share..
Hudson Square Research analyst, Daniel Ernst downgraded its rating for the shares of Sony Corporation (NYSE:SNE) (TYO:6758) from buy to hold. According to him, the company failed to provide details on how the entertainment unit will benefit from its television, smartphone, and other hardware manufacturing operations.
Meanwhile, Kota Ezawa and Takahide Kasai, analysts at Citi Research Equities doubted that an entertainment business IPO is the optimal solution to improve its performance. The analysts said they will carefully monitor the company’s future actions. The analysts recommended a buy rating with a price target of ¥2,700.