Sony Rejects Hedge Fund Boss Dan Loeb Proposal for Splitting off Entertainment Unit.
The decision, announced in a publicly disclosed letter to Mr. Loeb, raises questions about whether he will stage a public fight with Sony.
Mr. Loeb first disclosed a big stake in Sony — now about 7 percent — in May, in a big bet that he can shake up a Japanese company when many foreign shareholders have tried, and failed.
The letter followed a meeting between Dan Loeb and Sony’s bankers on July 17, at his Midtown Manhattan offices.
Sony’s chief executive, Kazuo Hirai, wrote in the letter that the company had considered Mr. Loeb’s proposal of spinning off part of the entertainment unit to the public markets. But Mr. Hirai wrote that after consulting with its financial advisers, Sony believed that owning all of the business would let it better mesh with its core electronics operations, without the legal encumbrances a partial spinoff would entail.
Moreover, Mr. Hirai wrote that Sony had considered and dismissed the notion that the company needed the capital that Mr. Loeb’s plan would have generated. Should it need to raise more money, Sony would look to other avenues for financing, he wrote.
But Mr. Hirai made one concession, writing that Sony’s entertainment arm would begin disclosing more information about its performance. Advisers to Sony had also recommended rejecting the proposal because of the tough history of partial spinoffs, a person who had been briefed on the matter said. A number of companies have tried listing subsidiaries on the public markets, with many having resorted to buying back the operation afterward.
Those cases include News Corporation’s brief experiment with having its Fox Entertainment arm listed publicly in 1998, only to take it private again seven years later.
Dan Loeb said he was disappointed with the decision, even while acknowledging that Sony was showing a greater commitment to transparency. His hedge fund, Third Point, said talks would continue according to Reuters.
‘‘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 on Tuesday in a statement.
“[Dan Loeb] calls himself an activist investor, and I would call him a carpetbagger, and one who is trying to spread a climate of fear that pushes studios to want to make only tent poles,” Clooney said.