Sony to buy out its lucrative finance unit for $3.7bn
The electronics giant has warned that operating profit could fall 30% this fiscal year because of the coronavirus pandemic
Tokyo — Sony has said it intends to take full control of its finance unit for about ¥395.5-billion ($3.7bn), buying out one of its most lucrative businesses.
The electronics giant will offer ¥2,600 a share for the part of Sony Financial Holdings that it doesn’t already own, it said in a statement on Tuesday. That’s a premium of about 26% to Monday’s close. Shares in the finance unit surged 19% on Tuesday, while Sony itself gained more than 3%.
Sony warned last week that operating profit could fall 30% or more this fiscal year because of the coronavirus pandemic’s effect on production and consumption. The financial services business, one of its most profitable, has seen a deterioration because its sales people can’t go out to pitch customers on insurance and other products, it said.
The difficulty in projecting future performance for that unit affected Sony’s ability to give a company-wide forecast for the year.
“The move could help stabilise Sony’s profit even when electronics businesses are in trouble,” Morningstar Research analyst Kazunori Ito said. But “there’s no synergy between the domestic financial units and other arms”.
CEO Kenichiro Yoshida has overhauled the technology icon in recent years to focus on franchises such as sensors for smartphone cameras and the PlayStation games business. Activist investor Dan Loeb has pushed for a sale of the finance operation but Yoshida has said the division, which sells insurance policies among other services, is integral to enhancing the company’s value.
The Tokyo-based company, also a major Hollywood entertainment producer, has been diversifying into banking since 2001. Sony Financial was set up in 2004 and at one point was expected to bring in the majority of the Japanese conglomerate’s operating profit.
Shares in potential candidates to take Sony Financial’s spot on the benchmark Nikkei 225 index climbed on Tuesday after the report, including Japan Post Bank and Seven Bank.