TOKYO — The US hedge fund manager renowned for shaking up Yahoo Inc. has set his sights on Sony Corp., proposing that the Japanese electronics giant spin off up to 20 percent of its movie, TV, and music division and use the money to strengthen its ailing device manufacturing unit.
Sony rejected the plan.
Sony’s US-traded shares closed up $1.87, or 9.9 percent, at $20.76 on Tuesday after hitting a 52-week high of $22.22 earlier in the day.
In a letter to Sony’s president, Kazuo Hirai, first published in The New York Times, Third Point LLC’s chief executive, Daniel Loeb suggests Sony take 15 to 20 percent of the entertainment unit public by offering current Sony shareholders the opportunity to buy shares in it. Loeb said that would allow the maker of PlayStation game machines and Bravia TV sets to fund improvements to its battered electronics operations and provide existing shareholders with a way to own one of Sony’s most profitable businesses more directly.
Sony said its entertainment business is not for sale and stressed it is trying to strengthen both that division and its electronics operations.
Despite Sony’s rebuff, analysts hailed the idea.
Pivotal Research Group’s Brian Wieser said becoming a separate company would allow Sony’s entertainment division to grow and be more profitable. It would also focus investor attention on its assets, which would take on new value as a potential acquisition target for media companies like CBS Corp., which declined to comment.
Call to action
Besides distributing blockbuster movies like ‘‘Skyfall,’’ Sony’s entertainment arm makes popular TV shows such as ‘‘Community’’ for NBC and ‘‘Breaking Bad’’ for AMC. Sony Music artists include Beyonce, Adele, and Bob Dylan. Sony operates 124 pay TV channels in more than 159 countries.
‘‘Buried inside of a bigger company, Sony has not been able to highlight the valuable businesses,’’ Wieser wrote.
Loeb’s letter said over 40 percent of Sony’s enterprise value is tied up in its entertainment assets, but they underperform, compared to their peers. If the division’s profitability were raised to the industry average, it would add $6.1 billion to Sony’s market value, he said. With the rise in Sony’s stock Tuesday, the company has a market capitalization of about $21 billion.
Sony grew from 1946 into a global powerhouse. It expanded into entertainment three decades ago. It acquired CBS Records in 1988 and Columbia Pictures in 1989. But Sony is often criticized for its failure to take advantage of having both electronics and entertainment under its wing. Sony shares peaked in early 2000 at $157.38. Some observers have pegged its decline to the debut of Apple’s iPod in 2001.
Following four years of red ink, Sony reported a profit of $434 million in the fiscal year that ended in March.