Sony switch prompts takeover talk

Sony's surprise decision to replace Nobuyuki Idei with Howard Stringer as chief executive has prompted investment bankers and rivals to consider a takeover of the world's second-largest consumer electronics group.

?Incredible though this may seem, these events put Sony in play. I am sure there will be plenty of people considering this over the next few days,? said a senior Hong Kong-based investment banker on Monday.

Analysts and other bankers cautioned that taking over Sony would be extremely difficult because of its size and iconic status in Japan's close-knit business world.

They argued that potential suitors such as South Korea's Samsung Electronics, and the US groups Apple Computer and Microsoft, would face stiff opposition from Japan's business establishment.

?Sony is such a national champion,? said another investment banker. ?Changing the management and putting a foreigner at the helm is one thing, but selling the whole company??

However, with Sony's share price languishing near a five-year low, the company is about 75 per cent smaller than it was at the height of the technology boom in 2000.

Bankers said that, with a market capitalisation of about US$36bn, Sony's size would not be an insurmountable obstacle. ?Samsung is more than double the market capitalisation these days and for someone like Microsoft it would be a drop in the ocean,? said one.

And, unlike other Japanese companies, Sony does not have a dominant shareholder nor is it protected by cross-shareholdings with affiliated companies. About 40 per cent of Sony's shares are held by foreign funds, with a further 21 per cent owned by Japanese institutions and the rest by domestic retail investors.

The group's largest single shareholder, with 12 per cent, is Moxley & Co, believed to be a nominee fund set up by JPMorgan Chase for holders of Sony's ADRs. A further problem for potential suitors would be Sony's wide range of businesses ranging from consumer electronics to film production.

?The only way a takeover would work would be to break Sony up and that is extremely unlikely,? a banker who has worked with the Japanese company said.

However, bankers in Japan said Mr Stringer's appointment would remove uncertainty over the company's strategy.

They argued potential bidders might have have missed their moment as the removal of Mr Idei signalled the company had recognised it needed to address problems at the highest level.

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