Sony has launched a $3.7bn offer to buy out shareholders in its financial services arm, taking advantage of a coronavirus-depressed market to capture a unit that generates a large slice of the Japanese group’s profits.
Sony owns 65 per cent of Sony Financial and said it would pay ¥2,600 ($24) a share for the rest of the company, a premium of 26 per cent to Monday’s close.
The move to fully unite Sony Financial’s online banking and insurance businesses with the group’s electronics and entertainment divisions comes despite pressure from the US activist investor Third Point for Sony to break up and focus on entertainment.
Kenichiro Yoshida, Sony’s chief executive, has instead argued that diversity is a strength, noting that Sony Financial kept its parent company afloat for nearly a decade as its consumer electronics businesses bled losses.
On Tuesday, Mr Yoshida said consolidating Sony Financial made sense during the coronavirus crisis and rising US-China tension.
“At a time when geopolitical risks are rising, it’s critical to have a steady profit base in Japan,” Mr Yoshida said. “By stabilising our business, it would allow us to increase our investment capability longer term.”
The company said buying in Sony Financial would boost its annual net profit — totalling ¥582bn last year — by as much as ¥50bn. The subsidiary currently generates about 15 per cent of Sony’s annual operating profit and revenue.
Sony Financial’s share price has dropped more than 20 per cent since early February and the current offer price does not attach a premium to where the stock was trading before the coronavirus outbreak. On Tuesday, the price jumped nearly 17 per cent and Sony’s share price rose 3 per cent after a report on the deal in the Nikkei newspaper.
Critics have long argued that the listed parent-child relationship that is still widespread in Japan is rich with potential for abuse of minority shareholders.
Such structures have begun to unfold in recent years with Hitachi, Toshiba and other companies buying in or selling their subsidiaries amid investor pressure for higher governance standards.