Well, this is surprising. Dan Loeb is on the verge of picking another huge fight, this time with Japanese giant Sony Corp. For starters, he's calling for the divestiture of Sony Entertainment. The insurance division too. Oh, and he's also looking for a seat on the board. And did I mention that Third Point has put away 6.5% of Sony's stock?
It might be a tough row for him to hoe, however. Japanese corporate culture doesn't take kindly to outsider interference, and Japanese companies are notoriously insular.
"There's an entrenched management culture there," said Lawrence B. Lindsey, a former top economist in the administration of George W. Bush. "Activists aren't particularly popular here among management, and they won't be popular in Japan either."
I'm wondering if he can actually pull off a Yahoo!-style raid in all but name and change the composition of one of Japans stalwart companies. Or if he's just hopping on the Japan bandwagon a la Herbalife. I guess only time will tell.
It appears Sony chairman Howard Stringer doesn't completely disagree with Loeb, for whatever that's worth:
"Japan is a harmonious society which cherishes its social values, including full employment," he said in a speech last year. "That leads to conflicts in a world where shareholder value call for ever greater efficiency."
It's kinda funny to see things come full circle like this, because when I was growing up Japan was seen as the model of corporate efficiency.
So what do you guys think? Is Loeb barking up the wrong tree? Will he hit an impassable cultural loggerhead? Or will he re-wire one of Japan's treasured companies? You think Marissa Meyer speaks Japanese?
There are Japanese companies that have a net cash position greater than their market cap. But you will never get it out. Shareholder activism is not part of the Japanese culture. I've looked at these companies before (wish I bought before the yen move). They look cheap on paper, but there is no way for shareholders to realize that value.
Even with a 6.5% stake, I am skeptical whether Loeb will be able to agitate for a breakup. And it is such an iconic company; Dan Loeb pushing for a breakup just doesn't play well. Imagine an analogous situation: "Chinese tycoon agitates for breakup of General Electric". Some people would oppose it on principle.
Good post. Agree entirely. He would need either a much bigger stake, or a lot of other shareholders to support him.
...or it not to be run by the Japanese.
CNBC was discussing this a little while ago about how they need to return to their roots of entertainment products like they did when they made waves with the walkman. Sony is in a good position to see strong growth as they heavily move into places like Mexico to manufacture products. It will be interesting to see if Loeb can iniatiate any changes over at Sony.
I have about eighteen years of Japanese experience and so feel somewhat qualified to comment on this topic. For the most part, I agree that Japanese business culture is not conducive to an aggressive activist approach in the vein of Carl Icahn, William Ackman, and Daniel Loeb. With that said, however, I think there is an opportunity here for the latter. For one, the current CEO of Sony, Kaz Hirai is not your typical, insular Japanese CEO. Although Japanese by ethnicity, Kaz grew up with a Western education (grew up in California, New York, etc.) and speaks native-level English. I think Mr. Loeb would be able to accomplish a lot here if he is careful with his approach and makes an effort to actually work closely together with management. In recent years, the boards of Japanese companies have been more open to the idea of selling off business divisions, stock buybacks, etc., so I believe there is a legitimate opportunity here for the right type of investor.
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