Activist fund Third Point had a history of taking major stakes in companies, and then pursuing aggressive changes. In 2013 they had also engaged with Yahoo, in a proxy fight that culminated with a new CEO being nominated, and Loeb joining the board. By western standards, corporate governance in Japan was considered poor. This case focuses on TP engagement with Sony. TP proposed Sony to spinoff up to 20 percent of its Entertainment Division and to reduce debt to strengthen its ailing Electronics Division. On August 6, 2013, following a unanimous vote of Sony’s board of directors, Sony sent out a letter to Third Point rejecting its proposal. In the letter, Sony declared that carving out the company’s entertainment business did not align with the “One Sony” strategy it was pursuing and listed a number of supporting arguments. One of the major arguments was that content was becoming an inevitable part of the mobile device business, so owning the entertainment business and having full control of it would bring more value to the overall Sony business than selling it off. Sony’s president and CEO Kazuo Hirai was fully committed to enhancing collaboration between the entertainment business and the electronics and services businesses. Third Point expressed its “disappointment” that Sony was turning down its proposal and issued a statement saying that it would “explore further options to create new values for shareholders following talks with the Sony management.” Third Point also declared that it “welcomes Sony’s commitment to greater transparency and expects this will foster a culture of accountability” and expressed its intention to see how Hirai’s pledge to improve margins and provide additional disclosure would be achieved.
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