TOKYO — Sony will turn listed subsidiary Sony Financial Holdings into a wholly owned unit for 400 billion yen ($3.73 billion) as it follows global tech giants Alibaba Group Holding and Apple in turning to finance as a stable profit generator that performs even during crises like the current pandemic, Nikkei has learned.
The Japanese electronics and entertainment group intends to combine its artificial intelligence and other technologies with the expertise of Sony Financial, which has a bank as well as life and casualty insurers under its umbrella.
Low share prices due to the coronavirus-triggered economic downturn convinced Sony to act now.
Sony, which owns about 65% of the financial unit, plans to buy the remaining shares through a tender offer. It is expected to pay about 2,600 yen per share, a premium of about 30% over Monday’s closing price of 2,064 yen.
Sony Financial will be delisted after it becomes a 100%-owned subsidiary around this summer. The unit holds roughly 14.5 trillion yen in assets, making it the biggest domestic financial institution affiliated with a listed nonfinancial company.
Alibaba in China collects payment data through the Alipay app, used by more than 1 billion consumers. The company makes use of the data in a number of ways, such as scoring individual creditworthiness when considering loan applications. Apple last year introduced a branded credit card that can be used digitally.
Sony may be eyeing new insurance products down the road. In January it unveiled an electric vehicle at the CES convention in Las Vegas, in the U.S. state of Nevada, touting the EV’s 33 sensors. An image recognition and other systems use some of those sensors to judge a driver’s concentration and tiredness levels from facial expressions and gestures. It is possible to use this kind of data to price automobile insurance policies.
Sony’s operating profit for the year ending March 2021 is expected to plunge at least 30% to around 590 billion yen. The electronics sector, including the TV business, has slumped due to the coronavirus outbreak. But the game and music businesses are generating stable profits through subscription models, which create steady revenue streams. Financial operations are seen producing stable income as well.
Sony’s financial business produced 129.6 billion yen — or 14% of total operating profit before transactions between segments are excluded — for the year through March. Though this segment is a key driver of earnings after games, semiconductors and music, the stake held by minority shareholders means that more than 30% of earnings flows outside the group.
Sony Financial’s share price is down about 20% from early February as the pandemic has hammered the overall stock market. Sony itself has been moving to secure cash by expanding its foreign-currency credit line, but the company also regards the financial unit’s low stock price as a good opportunity to take full control.