Bloomberg reports that Third Point LLC’s Daniel Loeb, a 51-year-old billionaire investor who purchased more than six percent of Sony, is pushing CEO Kazuo Hirai to sell as much as 20 percent of the company's entertainment assets in an initial public offering (IPO). Sony is now reportedly consulting Morgan Stanley and Citigroup as it considers adopting Loeb's proposal.
In a letter to Hirai on May 14, Loeb said that an entertainment IPO would actually help Sony sharpen the focus of its struggling, unprofitable TV and entertainment businesses. It would also boost its stock price, and raise some much-needed cash. Hirai acknowledged the proposal on Wednesday at the D: All Things Digital conference, but only said that Sony will closely examine the proposal. It's currently too early to speculate on the board's decision, he said.
“It’s something that needs to be discussed at the board level and discussed thoroughly,” Hirai said.
Despite recent stock gains, Sony is losing ground in the TV, smartphone and tablet markets to rivals Samsung and Apple. The company has reportedly lost nearly two-thirds of its market value over the past five years. However Hirai pointed out that its electronics business is indeed improving, citing the Xperia Z and the upcoming PlayStation 4 console as examples of Sony reviving its electronics company.
"If you look at the value of the entertainment properties for Sony, it’s been a great contributor to the bottom line," Hirai said in a CNBC interview. "We definitely want to make sure we can continue a successful business in the entertainment space. That is for me, first and foremost, the top priority."
Loeb said in his letter to Hirai that his stake in Sony is valued at around $1.1 billion, and he would underwrite a rights offering in the entertainment unit that would give shareholders the opportunity to participate. Third Point said that it would purchase up to $2 billion of the offering if there wasn't demand from other investors.