Sony Corp. (6758) is working with Morgan Stanley (MS) and Citigroup Inc. (C) as it considers adopting billionaire Daniel Loeb’s proposal for an initial public offering of its entertainment unit, people familiar with the matter said.
Third Point LLC’s Loeb, which acquired more than 6 percent of Sony, is pushing Chief Executive Officer Kazuo Hirai to sell as much as 20 percent of the entertainment assets in an initial public offering. Sony shares rose as much as 7 percent yesterday in New York and as much as 5.8 percent today in Tokyo, where they closed 2.1 percent higher at 2,049 yen.
Sony will look closely at Loeb’s proposal, though it’s premature to speculate on the board’s decision, Hirai said at a conference yesterday in Rancho Palos Verdes, California. An entertainment IPO would help Tokyo-based Sony sharpen the focus on its unprofitable electronics businesses, boost its stock price and raise cash, Loeb said in a May 14 letter to Hirai.
“The formal answer requires a third party, the finance professionals’ opinion,” said Hideki Yasuda, an analyst at Ace Securities Co. in Tokyo. “Sony can’t give a big shareholder an answer that hasn’t been properly considered.”
Shiro Kambe, a Tokyo-based spokesman for Sony, declined to comment, as did representatives for Morgan Stanley and Citigroup.
Film and financial-services earnings have helped Sony counter nine straight annual losses from making TVs. The company’s movie studio topped the U.S. box office last year with hits such as “Skyfall.”
Even after recent stock gains, Japan’s largest television maker has lost almost two-thirds of its market value over the past five years, losing ground in TVs to Samsung Electronics Co. and lagging behind Apple Inc. in smartphones and tablet computers.
“It’s something that needs to be discussed at the board level and discussed thoroughly,” Hirai said at the D: All Things Digital conference.
The electronics business is improving, Hirai said, citing the Xperia Z smartphone and saying the coming PlayStation 4 console will target frequent gamers before expanding into non-video game content and services.
“I want to revive the electronics company,” Hirai said at the conference.
“If you look at the value of the entertainment properties for Sony, it’s been a great contributor to the bottom line,” Hirai said in a CNBC interview. “We definitely want to make sure we can continue a successful business in the entertainment space. That is for me, first and foremost, the top priority.”
Loeb’s Sony stake was valued at about $1.1 billion, according to his letter. The 51-year-old investor said he would underwrite a rights offering in the entertainment unit that would give shareholders the opportunity to participate. Third Point, which manages more than $13 billion, would be willing to buy up as much as $2 billion of the offering if there isn’t demand elsewhere, according to the letter.
Sony’s shares have more than doubled in Tokyo trading this year.