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Sony needs to spin off its entertainment arm

by on15 May 2013

Wall Street Fund investor calls for change

Hedge fund investor Daniel Loeb called on Sony to spin off its lucrative entertainment arm, in what is being seen as a clash between his activist Wall Street fund and management and Japanese electronics maker.

Loeb said his Third Point hedge fund had accumulated a little more than six percent of Sony's shares making it the largest stakeholder. Loeb personally delivered a note to CEO Kazuo Hirai at Sony's headquarters saying that Third Point was willing to put up $1.97 billion to support an initial public offering of up to a fifth of the entertainment arm, which includes one of Hollywood's top film studios and a leading music label.

Loeb has a record of clashing with corporate executives over strategy, including engineering a successful boardroom shake-up at Yahoo last year. Loeb blessed Hirai's attempts to revive Sony, but said the problems of the company's electronics business distracted from the value of US-based Sony Entertainment, an asset he called a "hidden gem".

If Sony spun off its entertainment unit it could add another 60 percent to Sony's stock price. Sony has sold off real estate and other assets to cover losses on consumer electronics, but Hirai sees the entertainment business as core to the company's long-held vision of marrying content and hardware.

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