Activist Wants Sony to Spin Off Semiconductors -- WSJ
June 14 2019 - 3:02AM
Dow Jones News
By Patrick Thomas
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (June 14, 2019).
Daniel Loeb's activist hedge fund has Sony Corp. back in its
sights and is pushing the Japanese electronics and entertainment
company to spin off its semiconductor business.
Third Point LLC said in a letter to investors Thursday that
Sony's stock is undervalued and that the company's portfolio needs
to be less complex. Third Point said it has invested $1.5 billion
in building its position in Sony.
The hedge fund said Sony should also consider selling its stakes
in insurer Sony Financial Holdings Inc., health-care services firm
M3 Inc., manufacturer Olympus Corp. and streaming music service
Spotify Technology SA.
"We believe the proceeds of these divested stakes should be
invested in long-term growth or capital return to shareholders,"
Third Point said in its letter.
Mr. Loeb's push marks the second time in six years his $15
billion hedge fund has targeted the company. He tried to rally
shareholder support for a spinoff of the company's movie and music
assets in 2013.
Third Point had about a 7% stake in Sony in 2013, but the
company rejected its proposal and Third Point sold its stake in
2014.
But in a turn from its prior position, Third Point said Sony's
gaming, music and pictures segments would become its core following
a spinoff of its semiconductor unit.
Third Point said in its letter that its semiconductor division,
a business that includes image sensors for smartphones, should be a
stand-alone, Japan-listed company and has the potential to be a $35
billion unit within five years.
"Sony's legacy electronics assets are no longer the drag on
profitability that they were six years ago and will be a meaningful
cash flow contributor to New Sony," the hedge fund said in the
letter. "We first invested in Sony in 2013 because we believed it
was inexpensive due to inadequate investor disclosure, excessive
debt, an overly complex corporate structure, and consistent losses
in its consumer electronics segment."
Third Point praised Sony's Hollywood studio, saying Sony
Pictures remains one of the few independent film studio franchises
not owned by a major telecom or media distribution company, such as
Comcast Corp., AT&T Inc. and Walt Disney Co.
A representative of Sony declined to comment.
Sony said last month it would spend Yen200 billion ($1.85
billion) to buy back its stock during the current fiscal year,
which ends March 31. And while Third Point is pushing for a
breakup, Sony executives said last month they are looking at ways
of creating stronger links within its business, especially content,
intellectual property and direct-to-consumer services.
Sales of Sony's PlayStation consoles, which have been a key
sales driver for more than two decades, have slowed in the past six
months.
The company also said last month it could join with longtime
console system rival Microsoft Corp. on cloud and game-streaming
technology.
Sony's shares trading in Tokyo are down 3% over the past year,
while its U.S.-traded shares have fallen 0.3% over the past 12
months.
Write to Patrick Thomas at Patrick.Thomas@wsj.com
(END) Dow Jones Newswires
June 14, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Spotify Technology (NYSE:SPOT)
Historical Stock Chart
From Jul 2024 to Aug 2024
Spotify Technology (NYSE:SPOT)
Historical Stock Chart
From Aug 2023 to Aug 2024