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Hedge fund billionaire seeks break-up of Sony

Andrew Ross Sorkin and Michael J. De. La. Merced | May 15, 2013
An American hedge fund billionaire has called for a breakup of the entertainment and electronics colossus Sony, possibly setting off a battle that could roil Japan’s famously staid corporate culture.

Hedge fund billionaire seeks break-up of Sony
Hedge fund manager Daniel Loeb is pressing Sony into spinning off part of its entertainment arm. Photo Reuters

An American hedge fund billionaire known for starting big fights has called for a break-up of the entertainment and electronic colossus Sony, according to people briefed on the matter, possibly setting off a battle that could roil Japan's famously staid corporate culture.

The call, which came on Tuesday, will most likely be viewed by government officials and corporate leaders in Tokyo as a shot across the bow from Wall Street, just as Western investors begin piling into Japanese stocks.

The hedge fund manager, Daniel Loeb, is pressing Sony into spinning off part of its entertainment arm, which includes one of the biggest film studios in Hollywood and one of the largest music labels in the world, responsible for movies like "Skyfall" and artists like Taylor Swift.

Mr Loeb - known for ousting Yahoo's former chief executive and poaching Marissa Mayer from Google to run the company - also signalled that he would accept a seat on Sony's board. His hedge fund has quietly amassed a stake of about 6.5 per cent in Sony, making it one of the biggest shareholders.

But even big Japanese investors have often faced resistance in seeking changes at companies, a hurdle that may be significantly higher for a foreign hedge fund manager.

George Boyd, a spokesman for Sony, said he had no immediate comment.

Mr Loeb, 51, the founder of the hedge fund Third Point, flew to Tokyo this past weekend for three days of meetings with government officials, regulators and senior Sony executives, according to people briefed on the matter. He hand-delivered a letter on Tuesday to the company's chief executive, Kazuo Hirai, that praises a turnaround effort but asks for more.

"So while Third Point supports your agenda for change, we also believe that to succeed, Sony must focus," Mr Loeb wrote in the letter, which was reviewed by The New York Times.

The investor believes that spinning off a portion of the entertainment business to Sony shareholders could sharpen the company's focus and lead to higher profit margins, while helping to revive the core electronics business. Mr Loeb is also pressing for the spinoff of Sony's insurance division, which accounted for much of the company's profit last quarter.

Mr Loeb's campaign is a bet that Japan will prove the next gold mine for global investors. Long hobbled by a lost decade of little economic growth, the country has come to life in recent months under the stewardship of Shinzo Abe, who as Prime Minister has promoted policies meant to attract private investment. Mr Loeb is betting that Mr Abe will expand deregulation.

 

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