* Sony says spinoff plan would hinder synergies between
* Company vows more disclosure on entertainment unit
* Loeb says will continue dialogue with Sony, explore other
* Sony shares fall 5 pct but have more than doubled so far
By Mari Saito
TOKYO, Aug 6 Japan's Sony Corp on
Tuesday rejected a proposal from activist shareholder Daniel
Loeb to partially spin off its entertainment business but the
billionaire investor vowed to keep talking with the company and
to explore other options.
Sony said it could still squeeze synergies from its
decades-old marriage of content and hardware and promised more
disclosure in its entertainment operations.
Loeb's Third Point LLC hedge fund has waged a three-month
campaign to convince the company to sell as much as one-fifth of
its money-making entertainment arm - movies, TV and music - to
free up cash to revive the electronics business.
"Sony's board of directors has unanimously concluded that
continuing to own 100 percent of our entertainment business is
the best path forward and is integral to Sony's strategy," Sony
CEO Kazuo Hirai said in a letter to Loeb, which was released by
Loeb had cast his proposal for a public offering of part of
Sony's entertainment business as consistent with Prime Minister
Shinzo Abe's drive to boost economic growth through structural
reform in Japan.
But a source familiar with the discussions said Sony's
decision reflected worries about listing a subsidiary, not
resistance to corporate reform in Japan.
The company did not need the cash from a subsidiary IPO,
which would have created possible conflicts and cumbersome
requirements from such a listing, he added.
"I can't believe this is a statement on Japanese companies
not being willing to be flexible," said the source.
Loeb, who owns around 7 percent of Sony through shares and
cash-settled swaps, said he was disappointed with the decision,
even while acknowledging that Sony was showing a greater
commitment to transparency.
He also made it clear the saga was not over.
"Third Point looks forward to an ongoing dialogue with
management and intends to explore further options to create
value for Sony shareholders," Third Point said in a statement.
Sources familiar with the situation were sceptical, however,
about the prospects for a proxy fight taken directly to
shareholders, given the history of failures of such efforts in
Sony's shares fell 4.6 percent on Tuesday but are still more
than double their value at the start of the year, boosted by
Loeb's calls for reform at the company and by the prime
minister's reflationary "Abenomics" policies.
The company's promise of improved transparency in its
entertainment business includes quarterly updates on revenue in
its music and pictures segments, as well as other metrics.
Sony's board had been expected to reject Loeb's proposals,
the Nikkei newspaper said last week, with directors arguing Sony
could compete better by maintaining ties with the entertainment
arm of the business.
Chief Financial Officer Masaru Kato subsequently assured a
quarterly earnings briefing last Thursday, however, that Sony
was still discussing Loeb's proposal and would make a decision
after thorough consideration.
Sony said the board had since met again and rejected the
proposal in a unanimous vote, arguing that its decades-old
vision of wringing synergies from integrating its content and
electronics divisions was intact and gaining importance. Many
analysts and investors over the years have questioned the
potential of that strategy.
The company has long been a pillar of Japan Inc and a
pioneer in the electronics industry. But it has lost market
share - and its innovative edge - to aggressive foreign rivals
such as South Korea's Samsung Electronics Co Ltd and
Apple Inc as they churn out blockbuster products.
Loeb is credited with forcing change at Yahoo Inc,
where he waged an aggressive campaign to upend its previous
management in 2011 and 2012, accusing then-CEO Scott Thompson of
padding his resume with a non-existent computer science degree.
Thompson was out within weeks.
Actor-producer George Clooney criticised Loeb in an
interview published on Friday by film trade publication Deadline
Hollywood, calling him a "hedge fund guy who describes himself
as an activist but who knows nothing about our business".
Clooney accused Loeb of being "a carpetbagger, and one who
is trying to spread a climate of fear that pushes studios to
want to make only tent poles," referring to high-profile, big
Third Point has said it had no comment on Clooney's remarks.
Clooney co-founded production company Smokehouse Pictures,
and signed a production agreement with Sony Pictures
Entertainment in 2009.