Sony rejects Dan Loeb's spin off proposal

George Clooney in Up in the Air

Sony has rejected Dan Loeb's call to spin off its entertainment business, the company said on Tuesday.

In a letter to Loeb's hedge fund Third Point, the Japanese electronics giant said the board and management team "strongly believe that continuing to own 100 percent of the company's entertainment business is fundamental to Sony's success."

(Read more: George Clooney rebuts Loeb's critique of Sony )

It also rejected the notion that a rights or public offering will boost profitability or shareholder value, and argued that the move " would create the need for otherwise unnecessary and burdensome arm's length intercompany relationships as a result of minority shareholder rights, thereby limiting Sony's control and strategic flexibility."

Since amassing 6.9 percent ownership of Sony through Third Point, Loeb has been increasingly critical of Sony's business, in recent weeks calling its entertainment division "poorly managed."

(Read more: Change at Sony: Start of third leg of Abenomics? )

The billionaire activist has been pushing for a spinoff of Sony's money-making entertainment arm for months now, even as the Japanese firm battles to save its crumbling electronics empire, which has been plagued by stiff competition and lack of innovative products.

Early this week, outspoken Hollywood actor George Clooney came to Sony's defense , calling Loeb a "carpet bagger" who "knows nothing about" the film industry, in an interview with Deadline Hollywood.

(Read more: Why Sony's profit turnaround may be 'one-off' )

Last week, Sony said it returned to the black for the first time in three years in the second quarter, logging a net profit of 3.5 billion yen ($35 million) in the April-to-June quarter, compared to a 2.46 billion yen loss in the year ago period.

Sony shares fell 4 percent in early trade in Tokyo on the news.

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