Newspaper article International Herald Tribune

Activism by Investors Hits Walls in Japan ; Sony Management Quiet on U.S. Billionaire's Restructuring Proposal

Newspaper article International Herald Tribune

Activism by Investors Hits Walls in Japan ; Sony Management Quiet on U.S. Billionaire's Restructuring Proposal

Article excerpt

While Daniel S. Loeb is taking a lower-key approach in his push to restructure Sony, foreign activist investors have traditionally met resistance -- or even hostility -- in similar efforts at Japanese firms.


Devil. Vulture. Saboteur.

All these words have been used to greet Western investors who have agitated for change in Japan's clubby and complacent corporate culture. As the hedge fund billionaire Daniel S. Loeb prepares to take on Sony, he may find the same hostility from the company that at one time single-handedly defined premium quality in entertainment and electronics.

How Sony, and Japan, react to the demands brought by Mr. Loeb on Tuesday could become a test of how far the country has come in making good on promises to open up more to foreign investment and, more important, to change.

Prime Minister Shinzo Abe, who took office in December, has promised to shake up corporate Japan by removing onerous regulations, protections and inflexibilities that have sapped profitability and hampered serious revamping.

Investors have initially been cheering Mr. Loeb's efforts. Sony's shares rose nearly 10 percent in the United States to close at $20.76 on Tuesday. The reaction among those who matter -- Sony's managers -- has been muted.

Almost no local media outlets carried the story of Mr. Loeb's hand-delivered list of demands to Sony on Tuesday, hours after those demands had been made public. Sony itself issued only a curt statement, saying its entertainment businesses were "not for sale."

"Sony is an icon. Until now, it hasn't had a fellow like this coming in and making demands in public," said Nicholas Benes, a former Wall Street banker who now advises Japanese companies on corporate governance. "But now he comes in with guns blazing. This hasn't quite started off right, you might say."

Activist investors like Mr. Loeb's fund, Third Point, might seem like natural allies in that mission to prod Japanese corporations toward change. Mr. Loeb's demands for Sony's management center on bringing more focus to its sprawling business, something analysts have long called for, partly by spinning off a part of its entertainment arm. And Mr. Loeb cites Mr. Abe's promised economic overhauls as a big reason behind his recent interest in Japan.

Nowhere has revamping been so painfully needed as in Japan's electronics industry, where six major manufacturers, including Sony, still produce flat-panel televisions, mostly at a loss. Better labor mobility might change companies' approach to closing or spinning off unprofitable operations and focus on profitable lines of business.

U.S. activist investors have, however, met with frustration in efforts to add value at other companies. T. Boone Pickens, who acquired a minority stake in the auto parts company Koito Manufacturing in 1989, pressed its management for better dividends and a seat on its board. But the little manufacturer dug in its heels. Shareholders heckled him with anti-American taunts at the company's annual shareholder meeting; the news media branded him an opportunistic vulture. Koito's president refused even to meet the Texan magnate.

"O.K., Koito; I give up," Mr. Pickens declared in a statement two contentious years later, before selling his entire stake. "The heck with Japanese business."

Mr. Loeb is unlikely to get such openly hostile treatment from Sony, now that he is a significant investor, with a 6.5 percent stake in the company. After all, it is 2013, and Sony, unlike Koito, is a global, savvy firm.

Gerhard Fasol, president of the Tokyo technology consulting firm Eurotechnology Japan, said Mr. Loeb had probably studied past unsuccessful approaches to Japanese companies. …

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