Sony brush-off won’t end Dan Loeb campaign
By Peter Thal Larsen
The author is a Reuters Breakingviews columnist. The opinionsÂ expressed are his own.
The tussle over Sony may be the most courteous shareholder battle ever. Back in May, hedge fund manager Dan Loeb respectfully suggested the company spin off a stake in its entertainment arm. Now the Japanese groupâs board has politely rejected the idea. But the activist appears to be digging in for the long haul.
Loeb had argued that a partial listing of Sony Entertainment would improve its performance and help finance Sonyâs electronics businesses. But the company concluded a spinoff would throw up barriers between the media and electronics units at a time when content and devices are supposed to be increasingly seamless. Sonyâs advisers also cast doubt on the financial logic for a listing. Past experience suggests that the parent companyâs shares tend to underperform following a spinoff, while most subsidiaries are eventually re-absorbed by the parent.
The civil brush-off from Sony appears to leave Loeb with few options. Even in a country more receptive to activist investors than Japan, it would not be easy to force a company to list a subsidiary against its will. Sonyâs shares fell 5 percent on news of the boardâs decision, suggesting investors expect Loeb to walk away. However, he does not appear to be giving up just yet. Though Loebâs Third Point fund said it was âdisappointedâ by the boardâs decision, it welcomed Sonyâs commitment to greater transparency â and promised further ideas for creating value.
There are some encouraging signs for Loeb. Even after the latest sell-off, Sony shares are still 8 percent higher than when he launched his campaign: the broader Topix index is up just 2 percent over the same period. Moreover, Sony has shown itself more willing to listen to unwanted advice than some of its Japanese peers. The only discordant notes so far have come from actor and director George Clooney, who declared Loeb a âcarpet baggerâ and the âsingle least qualified personâ to be making judgments about the movie business.
Loeb has a reputation for writing caustic letters to his activist targets. In that respect, his courteous exchanges with Sony are unusual. But Sony CEO Kazuo Hirai and the rest of Sonyâs board cannot breathe a sigh of relief just yet.