Shares in Sony Corp. on the New York Stock Exchange climbed more than 3% Friday to close at $51.35 and rallied as much as 4% on Japan’s Nikkei after a new proposal by activist investor Daniel Loeb to break up the conglomerate.
Loeb, whose Third Point hedge fund has accumulated a $1.5 billion stake in Sony since first investing in 2013, released a letter Thursday night calling the company as “one of the most undervalued large cap businesses in the world today.”
In making the case for unlocking value, Loeb outlined his ideas for how the company should be divided and organized. Key elements to the proposal include selling off the company’s semiconductor unit, optimizing its capital structure and divesting its public equity stakes in Sony Financial, M3, Olympus and Spotify.
The tone and approach of the letter differed markedly from his broadsides at studio leadership early in his tenure as a shareholder. Loeb rattled a lot of cages, and publicly feuded with George Clooney in 2013 after his critiques of the studio’s management were blasted as “dangerous to our business” by the A-list star.
Whether Loeb’s current, more temperate pitch will have any tangible impact remains unclear. Asked for a response to Loeb’s plan, a Sony spokeswoman said the company “values dialogue with its shareholders.”
“New Sony,” minus the semiconductor holdings, would consist of music, gaming and entertainment assets. Loeb described this troika as being uniquely capable of benefiting from “tailwinds” in the industry. ” He pointed to “three of the most important secular growth drivers in the media space: 1) accelerating growth in console gaming revenue driven by in-game purchases and live services; 2) the shift in music and video consumption to subscription-based streaming services; and 3) the rising strategic value of music rights and film/TV libraries amid fierce competition for
content among streaming distribution platforms.”
Electronics, which languished years ago, are now “solidly profitable” and would be a “meaningful cash flow contributor” to the reconfigured company, Loeb wrote.
Third Point and Deadline parent Penske Media Corp. teamed to purchase Deadline’s sister publication Variety in 2012.