Sony CEO: ‘Premature’ to Say if Company Will Accept Spinoff Offer

Sony CEO: "Premature" To Say If

Sony CEO Kazuo Hirai said that it was “premature” to “speculate one way or the other” on whether the company would accept or reject the proposal from the company’s largest shareholder to spinoff as much as 20% of its entertainment assets, including Sony Pictures Entertainment and the music division.

In an interview with CNBC at the AllThingsD conference in Rancho Palos Verdes, Calif., Hirai said that it was “important that the board take a look at this proposal very seriously.” The idea for a spinoff came from Daniel Loeb’s Third Point hedge fund, which has acquired a 6.1% stake in the electronics giant. Loeb delivered a letter to Hirai last month outlining the proposal, which included having Third Point underwriting a public offering.

Even though there are doubts that Sony will ultimately accept such a proposal, seeing value in retaining the entertainment assets as it attempts to revive its electronics business, Hirai said that outside advisers will “assist us in objectively reviewing the proposal.” Bloomberg reported that Sony is working with Morgan Stanley and Citi to explore such a proposal.

“I think that if you look at the value of the entertainment properties for Sony, it has been a great contributor to the bottom line of the group numbers of us,” Hirai said. “We definitely want to make sure that we are able to continue a very successful business in the entertainment space, and that to me is first and foremost the most important priority, and that we continue to be able to work with the entertainment properties so that they can continue to provide a lot of great content to support our electronics business.”

Hirai seemed to reject suggestions that Sony abandon its effort to revive its TV manufacturing, or other electronics, in favor of financial services, which has been a boon to the bottom line. He noted that they have “halved our losses” in electronics, and that it is “a matter of focus and a matter of execution.”

Shares of Sony closed at $20.84 on Thursday, up 3.68% in U.S. trading.

At the conference, Hirai appeared onstage with San Francisco 49ers boss Jed York to talk about the idea of a “connected” sports stadium, incorporating wearable technology and, presumably, incorporating Sony technology. “All the things that we do digitally, I think it takes it a step further,” Hirai said of the idea of moving from devices to wearable computers.

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  1. Neo says:

    Sony plese dont sell or spin off Entertainment Division, thats so fucking stupid idea.

  2. Goober says:

    I think Entertainment Division was distraction that caused them to be asleep at the wheel on the electronics side. “if we feed our technology with our content they will buy whatever technology we decide to throw at them”. Wrong.

  3. Roger Miller says:

    I believe that the analysis which Morgan Stanley and Citi will, or should, undertake will evaluate the various constituent parts of Sony as stand-alone entities, each with their own financial structures, and p/e and other valuation metrics. This is similar to the type of analysis that has led to the de-conglomeratization of many unwieldy enterprises over the years, when such studies indicated that the separated entities had much higher market values in total than the enterprise as a single unit. It is probably a step further than the analysis already undertaken by Dan Loeb, who has clearly identified Entertainment as the crown jewel. It should also benefit from internal Sony information not available right now outside the company. The most important such info is probably what the plans are for the money-losing Electronics division.
    It is more than likely, if not highly probable, that the above analysis will reach the conclusion that investors would be much better off with a Sony split-up. At the same time, management, as they almost always do, will resist such a move. They will argue that the company would be much better off kept together, and may be aided in that contention, if they lift the kimono (no pun intended) a little and reveal more than an outline of what the future, in their opinion, holds. They will also be aided somewhat by the relative solidarity of Japanese business and Japan, Inc, though that has been eroding over time
    At the very least, this is going to be an intriguing situation to follow. I believe its current seeming civility could well degenerate if no restructuring proposals emerge from Sony in the near future and they attempt to maintain the status quo. Perhaps we might see a substantial share buy-back, including a major portion of Loeb’s holdings, even “green-mail”, though I think that’s unlikely. However, you never know, and the situation remains fluid. Keep watching!

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