The board of Japan’s Sony Corporation has rejected a proposal to sell parts of its entertainment business. The demand was raised by a US activist shareholder seeking change at the Japanese electronics giant.
Sony’s board of directors had unanimously decided to continue owning 100 percent of its entertainment business, the electronics firm’s president Kazuo Hirai said in a letter published Tuesday.
The letter was addressed to Daniel Loeb, Chief Executive of Third Point LLC hedge fund, who had waged a month-long campaign to convince Sony to sell up to 20 percent of its movies, music and television business.
Sony Pictures and Sony Music were fundamental to the company’s success, Hirai wrote in the letter, because content was increasing in value and would benefit from the proliferation of new distribution platforms, high-speed internet access and mobile devices.
Corporate governance row
Loeb, who owns about 7 percent in Sony, said he was disappointed with the decision, and added that Third Point would continue to explore further options to create value for Sony shareholders.
Last week, the US billionaire investor said in a letter to investors that Sony’s entertainment unit was poorly managed, with a famously bloated corporate structure, generous perks, high salaries for under-performing senior executives, and a marketing budget not in line with any sense of return on capital invested.
“Drastic, rather than incremental action is required,” Loeb added.
Return to profits appeases
Sony CEO Hirai wrote in his letter that the company’s executive would continue to give full consideration to any constructive feedback from valued shareholders, promising to maintain a productive relationship with Loeb.
At the same time, Hirai stressed that he could still squeeze synergies from the combination of content and hardware at Sony.
Hirai’s rejection of the deal came as Sony has swung back to a net profit of 3.5 billion yen (26.4 million euros) in the second quarter of 2013, a reversal from the 24 billion yen loss it suffered in the period a year ago.