Sony gently pushed back on Daniel Loeb's Third Point on Monday, saying it has no intention to spin off its entertainment division and politely rejecting the activist investor's scathing criticism of studio leadership — while conceding that Sony Pictures Entertainment could certainly be doing better.
Signed by Sony Corporation President and CEO Kazuo Hirai (pictured right), the letter says Sony is open to a dialogue with Loeb — and calmly thanks him for his contributions as a major investor — but won't be taking his note to cast out the studio.
The letter followed a unanimous vote by Sony's board of directors, saying its members believe owning 100 percent of its entertainment assets is "fundamental to Sony's success" and sustained growth.
The board's reasoning: Demand for content is growing via emerging platforms, and the company “believes its entertainment businesses will increasingly benefit from these trends." Moreover, full control of content drives collaboration — and a public offering would “create the need for otherwise unnecessary and burdensome arm’s-length intercompany relationships," the letter reads.
The company also notes that it has access to plenty of capital to prop up its entertainment division should something unforeseen happen.
The letter concedes that more transparency is needed — promising "additional disclosures regarding its entertainment businesses for the second quarter of the current fiscal year" — and admits that things could be better:
"While we believe our theatrical marketing costs have been and continue to be in line with our competitors, and that our margins are generally comparable to some other major studios, we recognize that our margins should be higher," the letter reads.
"To us these latest blunders are prima facie evidence of our thesis that U.S. Entertainment based business is being ineffectively overseen and needs its own governance structure," he said at the time.
Loeb’s Third Point Management owns a 6.5 percent stake in Sony, a holding valued at $1.1 billion. He has been agitating — quite publicly — for Sony to spin-off its entertainment assets into a separate publicly traded company.