Dan Loeb's Third Point Boosts Sony Stake, Reiterates Stance For Entertainment IPO

Activist investor Ran Loeb of Third Point Capital has taken a larger stake in embattled technology maker Sony SNE in an attempt to maximize shareholder value in the conglomerate. Loeb overnight announced that his fund raised its stake in the company to 6.9 percent in a bid to force through his proposal to a break up of the company.

Entertainment IPO

As part of Loeb's value creation strategy, he wants Sony to spin out its large entertainment business which is comprised of its movie and music entertainment businesses. He proposed that Sony initially sell 15-20 percent of the entertainment business with a view to spin it out completely with a view to spinning off the entire business in the end.

Loeb values the entertainment business at $10 billion and sees an initial sale of 20 percent adding $2 billion in cash to the company's balance sheet. He believes that the entertainment division lacks the discipline needed to perform as a public company and thus says that the arm should be spun out.

Encouraging Signs

Loeb says that the recent release of the Xperia Smartphone in Japan as well as the outlook for the Playstation 4 show that the hardware business may be turning a corner. However, he believes that the entertainment division is weighing down overall performance.

Loeb also reiterated his stance to take a seat on the board of Sony. However, he said that he has had no contact with the board of Sony nor its bankers to discuss any possible moves yet.

Sony Responds

Son'y board responded promptly, saying it would conduct a review of the proposal and added that it would not comment on specifics. "Sony welcomes investment in the company. We are focused on creating shareholder value by executing on our plan to revitalize and grow the electronics business, while further strengthening the entertainment and financial service businesses which generate stable profit."

"As President and CEO Kazuo Hirai has said repeatedly, the entertainment businesses are important contributors to Sony's growth and not for sale."

Shares Move

Sony's U.S. listed shares gained 3.47 percent in late intraday trading in the U.S. Shares have more than doubled this year however remain well below the peak of the past decade.