Sony could pursue a partial divisional spin-off by listing its finance unit within the next two to three years.
Sony Group Corp is reportedly mulling a partial spin-off and listing of its finance unit just three years after assuming full ownership. The Japanese multinational conglomerate could retain a stake of slightly less than 20% of Sony Financial Group. In addition to a possible spin-off, Sony is also focusing on other operational plans, including strengthening its entertainment and image sensor businesses.
The Tokyo-based company’s shares rose 6% on positive investor reception to the operational developments.
Sony CFO Comments on Finance Unit Listing Plans
In a strategy meeting, Sony chief financial officer Hiroki Totoki touched on the need to spin off the finance unit with a partial listing. According to Totoki, the company’s financial group, including life insurance and banking, requires substantial capital to sustain. “It is a challenge to balance this with our investment in other growth areas such as entertainment and image sensors,” he added.
Totoki also explained that Sony would deploy a government scheme that permits companies to divest their units without additional tax burdens. Furthermore, the company could achieve a partial spin-off of ‘finances’ but still see the new listing retain the Sony branding. As it stands, Sony seeks a fine balance within all its business divisions.
On Sony’s public perception following the listing, which could take two to three years, LightStream Research analyst Mio Kato said:
“It doesn’t change anything drastically in terms of the outlook for Sony, but it does make it a more pure play entertainment company which the market generally likes.”
Sony’s finance unit sustained a 5% revenue decline to 1.45 trillion yen ($10.74 billion) in the first quarter of the year. However, operating profit surged 49% to 223.9 billion yen, spurred by a one-off real estate sale gain.
Sony forked out $3.7 billion three years ago to fully own its financial unit. This move came despite some external pressure from activist investors to focus on entertainment. However, in the last five years, the PlayStation maker has expanded its entertainment portfolio with a slew of lofty acquisitions. These include purchasing EMI Music Publishing for $2.3 billion and Crunchyroll for $1.2 billion. Crunchyroll is an anime streaming service formerly owned by American telco giant AT&T (NYSE: T).
Amid its entertainment-driven agenda, Sony previously said it expects to sell 25 million PlayStation consoles in 2023. As supply chain constraints taper, the Japanese corporation expects to achieve this record target in the financial year. Despite forecasting a decline in first-party software sales for 2023, Sony expects several notable title releases this year. This includes a sequel to its exclusive Marvel’s “Spider-Man” game.
MST Financial analyst David Gibson touched on Sony’s plans to steepen investments in entertainment. He opined that proceeds from listing Sony Financial could help fund the conglomerate’s “aggressive merger and acquisition” activities. “Consolidation in entertainment has been happening, and Sony doesn’t want to be left behind,” Gibson pointed out.
Meanwhile, Macquarie analyst Damian Thong hailed Sony’s latest operational decision as a brilliant opportunistic move.