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."
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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."
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.
Analysts say Sony's rejection of the deal doesn't mean Loeb's going to back down from here.
(Read more: Change at Sony: Start of third leg of Abenomics?)
"I wouldn't call it [the deal] off immediately. There's going to be a lot of back and forth. Loeb is an activist investor that doesn't easily go away," aid King Lip, CIO at Baker Avenue Asset Management on CNBC's "Cash Flow."