Tags: Sony | Stock | Board | Spinoff

Sony's Stock Surges on Report Board May Discuss Spinoff

Tuesday, 21 May 2013 08:40 PM

Shares of Sony Corp. rose 9.3 percent Tuesday in the U.S after Japan's Nikkei newspaper reported the company's board may discuss spinning off its entertainment division.

Sony American depositary receipts advanced $1.94 to close at $22.91 in New York, the biggest gain since May 14, when investor Daniel Loeb's Third Point LLC proposed selling as much as 20 percent of the unit in an initial public offering. The assets include Tokyo-based Sony's Culver City, California-based film and television studio, and its music business.

Sony executives are holding their regular corporate strategy meeting in Tokyo Wednesday. The company has relied on profit from its entertainment and financial services units to counter losses from the flagship consumer-electronics business. Loeb met last week with Chief Executive Officer Kazuo Hirai to deliver his proposal, which suggests the spinoff would bring a higher valuation and raise cash for Sony.

Sony "is considering evaluating" Loeb's proposal at a board meeting, Nikkei reported. The newspaper published a revised English-language translation on its website, which earlier said Sony was "leaning toward" a spinoff.

Jim Kennedy, a spokesman for Sony, declined to comment. Elissa Doyle, a spokeswoman for New York-based Third Point, didn't respond to a request for comment.

Expectations that Sony will take action are driving the stock higher, said Mitsuo Shimizu, a Tokyo-based analyst at Iwai Cosmo Holdings Inc.

"Realistically, it's not clear whether a spin-off will strengthen Sony," the analyst said.

Music, TV

In addition to raising cash to help turn around the electronics unit, the spinoff would provide a more disciplined focus on the entertainment group, Loeb's hedge fund said in a May 14 letter to Sony's Hirai.

Sony’s movie studio makes the "Spider-Man" and "Smurfs" movies. Television production includes "Breaking Bad" for AMC Networks Inc. In music, the company owns Sony Music Entertainment, home to Alicia Keys and Paul Simon. Its Sony/ATV Music Publishing joint venture with Michael Jackson’s estate collects royalties on music from the Beatles and Jackson.

Sony plans to hire outside advisers to estimate how much a spinoff would add to the company's value, with directors making the decision whether to pursue Loeb's strategy, Nikkei said.

Sony has missed a three-year rally in media stocks because of losses in its hardware businesses. Since January 2010, the S&P 500 Media Index has more than doubled, while Sony, with one of the world's largest collections of movie, television and music businesses, has declined 21 percent.

Loeb has invested $1.1 billion in Sony to become the company's biggest investor, he said in his letter, and is willing to bet more.

The investor said he would underwrite a rights offering in the entertainment unit that would give shareholders the opportunity to participate. Third Point, which manages $13 billion, would "backstop" the initial public offering up to $2 billion, meaning Loeb would soak up any entertainment stock others don’t want.

Sony will host a call with investors at 5 p.m. Wednesday local time in Tokyo. To participate dial: +81-3-4560-9500 with passcode 809820 for Japanese; for English dial +1-866-218-9034 or +81-3-4560-9500 locally with passcode 193661.

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Shares of Sony Corp. rose 9.3 percent Tuesday in the U.S after Japan's Nikkei newspaper reported the company's board may discuss spinning off its entertainment division.
Tuesday, 21 May 2013 08:40 PM
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