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Sony advised to spin off entertainment division

Move could help Japanese firm reduce its debts.


Sony has been advised to spin off its entertainment division as it could help the firm increase its value by up to 60 per cent.

Third Point, a hedge fund in New York, claimed that floating the Sony Entertainment division which includes one of Hollywood's leading film studios and one of the world's biggest music labels, would help the Japanese firm reduce its debt.

Third Point, a $13 billion hedge fund founded by billionaire investor Daniel Loeb, said it would put up 150-200 billion yen ($1.5-$2 billion) to support a public offering for Sony Entertainment.

In a letter to Sony Chief Executive Kazuo Hirai, the hedge fund recommended Sony sell a 15-20 per cent stake by offering subscription rights to existing Sony shareholders.

"Our plan shifts that paradigm and we believe, if managed properly, it could result in as much as 60 per cent upside to Sony's share price," Third Point said in a statement.

An official at Sony said its entertainment businesses are important growth contributors and are not for sale.

Third Point said it is the largest owner of Sony, holding shares worth 115 billion yen ($1.13 billion). Sony currently has a market value of close to $18.5 billion.

Loeb is one of the most closely watched hedge fund managers in the $2.25 trillion industry. His fund is known for building a sizeable position in distressed Greek government bonds last year and investing heavily in Yahoo shares.

Third Point's flagship hedge fund gained 1.4 percent in April, pushing returns to 10.5 percent for the year, according to an investor note reviewed by Reuters.

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