Sony considers partial spin-off and listing of financial services unit

Sony said it would consider demerging and re-listing shares of its financial services arm to ramp up investment in its entertainment business, pleasing investors with a U-turn in strategy.

Shares in the Japanese conglomerate rose 6.4 percent on Thursday as investors welcomed the move as a way to unlock value in the Japanese conglomerate. Sony plans to retain around 20 per cent stake and is targeting a two to three year time frame for the listing.

Three years ago, Sony spent $3.7 billion to take full control of its financial unit, which houses the group’s online banking and insurance businesses, despite pressure from US activist investor Third Point to break away and focus on entertainment.

But at a news conference, Sony’s newly appointed chairman Hiroaki Totoki said a partial spin-off of its financial arm was necessary to strengthen its investment potential.

“To expand our growth over the medium to long term, we will need the ability to invest in the image sensor and entertainment business to an entirely new level,” Totoki said.

Over the past five years, Sony has gone on an acquisition spree to expand its entertainment assets, buying EMI Music Publishing for $2.3bn and spending $1.2bn to acquire AT&T’s anime streaming service Crunchyroll.

Totoki said Sony will make use of a government scheme that allows companies to break up their units without bearing the additional tax burden.

Companies in Japan have come under increasing pressure from activist investors and the Tokyo Stock Exchange to improve governance and capital efficiency.

Japan shares have been boosted by rising hopes of higher governance standards, larger share buybacks and other value-enhancing measures. On Thursday, the benchmark Topex index was at a 33-year high, up more than 15.5 per cent since the start of the year.

David Gibson, a longtime Sony analyst at MST Financial, said the move was in line with the company’s plans to increase its investments in image sensors and entertainment. He added that Sony Financial’s initial public offering could be used by the company to help fund “aggressive merger and acquisition” activity.

“Consolidation is happening in entertainment and Sony doesn’t want to be left behind,” he added.

Macquarie analyst Damian Thong called Sony’s latest decision “an excellent move”, adding that “it’s good that Sony has been able to change course when new opportunities arise”.

Many investors questioned Sony’s original decision to take full control of its financial business in 2020, noting the lack of synergy with the group’s other businesses.

At the time, executives explained that the diversity of its business portfolio was a strength for Sony.

“It probably removes the collective discount to some degree,” said a major Sony shareholder. “It’s not a huge game changer, but I think it’s the right decision.”