The tussle over Sony may be the most courteous shareholder battle ever. Back in May, hedge fund manager Daniel S. Loeb respectfully suggested the company spin off a stake in its entertainment arm. Now the Japanese group’s board has politely rejected the idea. But the activist appears to be digging in for the long haul.
Mr. Loeb had argued that a partial listing of Sony Entertainment would improve its performance and help finance Sony’s electronics businesses. But the company concluded a spinoff would throw up barriers between the media and electronics units at a time when content and devices are supposed to be increasingly seamless. Sony’s advisers also cast doubt on the financial logic for a listing. Past experience suggests that the parent company’s shares tend to underperform following a spinoff, while most subsidiaries are eventually re-absorbed by the parent.
The civil brush-off from Sony appears to leave Mr. Loeb with few options. Even in a country more receptive to activist investors than Japan, it would not be easy to force a company to list a subsidiary against its will. Sony’s shares fell 5 percent on news of the board’s decision, suggesting investors expect Mr. Loeb to walk away. However, he does not appear to be giving up just yet. Though Mr. Loeb’s Third Point fund said it was “disappointed†by the board’s decision, it welcomed Sony’s commitment to greater transparency - and promised further ideas for creating value.
There are some encouraging signs for Mr. Loeb. Even after the latest sell-off, Sony shares are still 8 percent higher than when he started his campaign: the broader Topix index is up just 2 percent over the same period. Moreover, Sony has shown itself more willing to listen to unwanted advice than some of its Japanese peers. The only discordant notes so far have come from actor and director George Clooney, who declared Mr. Loeb a “carpet bagger†and the “single least qualified person†to be making judgments about the movie business.
Mr. Loeb has a reputation for writing caustic letters to his activist targets. In that respect, his courteous exchanges with Sony are unusual. But Sony C.E.O. Kazuo Hirai and the rest of Sony’s board cannot breathe a sigh of relief just yet
Peter Thal Larsen is Asia editor at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.
