Sony and the Activist Threat

Fernandes, Nuno

Product #:F-0970-E

Supplier:IESE Publishing

Discipline:Finance

Setting:Japón

Details:Case (PDF) • 15 pages • 2021-07-13

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This case is about an activist shareholder attacking Sony. On May 14 2013, Third Point, the activist shareholder, delivered a letter to Kazuo Hirai, president and CEO of Sony Corporation (Sony). The letter revealed that Third Point had purchased a 6.9% stake in Sony and proposed that Sony spin off up to 20% of its Entertainment Division to reduce its debt and strengthen its ailing Electronics Division. Activist fund Third Point had a history of taking major stakes in companies, and then pursuig 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.

Learning Objectives

The case provides students with an opportunity to discuss important questions regarding shareholder activism and its impact on value. Participants have the opportunity to analyze the strategic and financial issues associated with an activist shareholder campaign, including the different strategies these investors use. Some of the questions discussed include: - The role of Sony's board of directors - The role of institutional investors - What makes a company a good target for activist campaign - How spinoffs can help or hinder? - The importance of focus, and the conglomerate discount - Do activist shareholders add value?