Sony said late on Monday that it it planned to hold onto all of its vast entertainment arm, rejecting a proposal by one of the Japanese conglomerate’s biggest investors, the activist hedge fund manager Daniel S. Loeb.
The decision, announced in a publicly disclosed letter to Mr. Loeb, raises questions about whether the famously feisty investor will stage a public fight with the company. Mr. Loeb first disclosed a big stake in Sony â€" now about 7 percent â€" in May, in a big bet that he can successfully shake up a Japanese company when many foreign shareholders have tried, and failed.
The letter followed a meeting between Mr. Loeb and Sony’s bankers on July 17, at the hedge fund manager’s Midtown Manhattan offices.
Sony’s chief executive, Kazuo Hirai, wrote in Monday’s letter that the company had considered Mr. Loeb’s proposal of spinning off a portion of the entertainment unit to the public markets. But after consulting with its financial advisers, Sony believed that owning all of the business would let it better mesh with its core electronics operations, without the legal encumbrances that a partial split-off would entail.
Moreover, Mr. Hirai wrote that Sony had considered and dismissed the notion that the company needs the capital that Mr. Loeb’s plan would have generated. Should it need to raise more money, the conglomerate would look to other avenues for financing.
But Mr. Hirai did make one concession, writing that Sony’s entertainment arm will begin disclosing more information about the performance of the business.
Advisers to Sony had also recommended rejecting the proposal because of the tough history of partial spin-offs, according to a person briefed on the matter. A number of companies have tried listing subsidiaries on the public markets, with many having resorted to buying back the operation afterward.
Among those instances was the News Corporation‘s brief experiment with having its Fox Entertainment arm listed publicly in 1998, only to take it private again seven years later.
A representative for Mr. Loeb wasn’t immediately available for comment.
