The Third Point alternative investment fund calls Sony to split a semiconductor unit

Third Point LLC on Thursday asked Sony Corp. to discontinue its semiconductor business and sell its interests in Sony Financial and other units to position itself as a world leader in entertainment.

This is the second time in six years that Loeb, one of the most prominent investors in the world, targets the Japanese electronics manufacturer – although last time he advocated a radically different reworking, calling for a spin -off of entertainment.

Reuters reported in April that Third Point was targeting Sony again. His stake in the company is $ 1.5 billion, Third Point said in a letter to investors.

In a 102-page presentation, the New York-based hedge fund also said that Sony's shares had been dumped in part because of its complex structure, and called for a bold move by the bank. direction to simplify it.

The semiconductor division is "often treated by investors as an afterthought" and is expected to be sold to a Japanese company called Sony Technologies, Loeb said.

While Japan pioneered the semiconductor industry, other Asian countries reduced its market share even though Sony was "holding up," Loeb told investors in its letter.

"New Sony" would become a leader in creative entertainment in the areas of gaming, music, image and electronics, he said.

Third, Sony should also consider divesting stakes in Sony Financial Holdings Inc., M3 Inc., Olympus Corp and Spotify Technology SA.

Third point, Third Point said that Sony could "significantly reduce complexity", which is a major negative factor in the valuation of the company.

Sony said it would take shareholder participation "seriously" and "engage in a constructive dialogue" with shareholders.

"Sony is looking forward to investing in the company. We refuse to comment on the details of our shareholder dialogue, "said the company in a statement following its interrogation on Third Point.

The Japanese company has hired Goldman Sachs to give advice on the treatment of Third Point, said a person close to the case. A spokesman for Goldman declined to comment

Sony shares rose 4% in Tokyo on Friday. The stock is up almost 15% since early April, when Reuters revealed for the first time that Loeb was taking a stake in Sony. This compares to a 3% drop in the Nikkei 225 index over the same period.

BIG DEAL

Makoto Kikuchi, general manager of Myojo Asset Management in Tokyo, who does not hold Sony shares, questioned the merits of the split of the semiconductor unit, which would have benefited other companies, including the PlayStation.

"It does not make sense for Sony to remove its semiconductor unit because it is one of the successful companies that contributes to its profits," he said.

Loeb supported Sony CEO Kenichiro Yoshida, stating that he could create a "Sony louder" by focusing on unlocking the value of his badets.

Until now, relations were cordial and the two parties met in New York last week, when Loeb and several colleagues presented to Sony's executives, including Yoshida, the presentation and reflections of the hedge fund.

For weeks, rumors surfaced about what Loeb would like Sony to do and about Sony's reaction. Until then, Sony has not indicated what it would do in response to Third Point's suggestions.

When Loeb contacted Sony for the first time in 2013, he created a position of about one billion dollars and handed a letter to the company's general manager, Kazuo Hirai, asking him to sell some of his business. entertainment. He left with a gain of 20% on his investment, he said publicly, regretting not having realized greater gains.

Six years later, Hirai has stepped down as CEO of Sony and a number of tax regulations have been changed in Japan, making it more attractive for companies that want to potentially divest out of compatible business.

Loeb is also coming back to Japan, amid a new wave of activism where investors such as ValueAct, King Street Capital Management and Fir Tree Partners have called for changes at Olympus Corp, Toshiba Corp and Kyushu Railway. .

Japanese companies accustomed to their habits are often reluctant to give in to pressure from investors. However, Loeb is no stranger to companies that have a great chance of succeeding. Last year, he sought to oust the entire Campbell Soup Co board of directors, while the founding family controlled much of the US food company. He ended up settling for two seats on the board of directors.

Third Point posted a 9% return in the first quarter of 2019, mainly due to gains made by Nestlé, publicly criticized by the hedge fund in 2018 for its "confused strategic approach".