Sony shares tumble as board unanimously reject calls to spin off entertainment business

Sony’s Board of Directors has unanimously rejected calls from activist investor Daniel Loeb to spin off its entertainment business, saying it is “fundamental” to Sony’s success.

Loeb, who is one of the company’s biggest shareholders and founder of the Third Point hedge fund, wrote an investor letter last week saying the entertainment division is “poorly managed, with a famously bloated corporate structure”, and proposed 15 to 20 per cent be spun off.

In a letter to Third Point, chief executive Kazuo Hirai said:

While we share with you the objectives of increasing profitability and driving shareholder value, after careful review, the Sony Board of Directors has unanimously concluded that continuing to own 100% of our entertainment business is the best path forward and is integral to Sony’s strategy. We do, however, expect to increase disclosure regarding Sony’s entertainment businesses. We agree this can help market participants analyze their performance and monitor their success.

Hirai went on to say Sony is committed to increasing profitability in entertainment and increasing margins at pictures, partially through reducing costs.

Demand for content is increasing its value in a dynamic industry environment, and we believe our entertainment businesses will increasingly benefit from these trends.

He adds that there are more efficient ways of raising the $2bn of capital it is estimated could be generated through a rights or public offering.

Sony’s shares ended down 4.6 per cent in Tokyo at 2,039 yen, having fell 5.9 per cent when the rejection was first announced.