BILLIONAIRE hedge fund investor Daniel Loeb yesterday called on Sony Corp to spin off its lucrative entertainment arm, setting the stage for a clash between the activist fund and management at the Japanese electronics maker.

Loeb said his Third Point hedge fund had accumulated a little over 6 percent of Sony's shares, or worth US$1.1 billion, making it the largest holder in the inventor of the Walkman portable music player.

In a letter personally delivered to CEO Kazuo Hirai at Sony's headquarters yesterday, Loeb said Third Point was willing to put up another 200 billion yen (US$1.97 billion) to support an initial public offering of a 15-20 percent stake in Sony Entertainment, which includes one of Hollywood's top film studios and a leading music label.

The US$13 billion hedge fund said the move would generate cash to help the company's ailing electronics operations, and could add another 60 percent to Sony's stock price, which has already doubled this year amid a strong rally in Japanese shares.

Loeb set his argument against a backdrop of hope for corporate reform under the leadership of Prime Minister Shinzo Abe, who returned to power in December promising to pull the economy out of a two-decade slump.

"Sony stands at the crossroads of compelling corporate opportunity and massive Japanese economic reform," Loeb wrote in the letter, which was disclosed to the media. Corporate leaders like Hirai, he added, "can spearhead this important growth."

While Sony has sold off real estate and other assets to cover losses on consumer electronics, it has previously rejected calls to spin off the unit.