AT&T in Talks to Resolve Elliott Management's Activist Campaign
By Corrie Driebusch, Drew FitzGerald and Dana Cimilluca
AT&T Inc. is in talks with Elliott Management Corp. to
resolve the activist investor's campaign for change at the phone
and media giant, people familiar with the matter said.
The two sides have held a series of wide-ranging discussions
since Elliott disclosed a stake in AT&T five weeks ago and
publicly urged the company to make changes aimed at igniting its
lackluster share performance. AT&T and Elliott could reach an
agreement as soon as this month, though the talks could also fall
apart, the people said.
The two sides are discussing a number of items that could form
the basis of a pact, including a move by AT&T to launch a
strategic review of assets that could be sold or spun off and a
push to improve margins. AT&T could also agree to make changes
to its board with input from Elliott.
AT&T recently delayed the release of its quarterly earnings,
initially scheduled for next week, giving the two sides more time
to reach an agreement. The Dallas company is now expected to
discuss its latest results on Oct. 28, a day before it will unveil
its HBO Max streaming service at an event in Burbank, Calif.
Should AT&T and Elliott come to terms by then, it would be a
relatively quick turnaround compared with the traditional activist
campaign. It would show AT&T, which has enlisted bankers at
Centerview Partners and Goldman Sachs Group Inc. for help, is eager
to avoid a drawn-out public brawl and get on with addressing the
challenges to its business.
Elliott has compiled a list of director candidates it thinks
AT&T might consider, according to one of the people. Should
talks sour, some could be considered as board nominees for a proxy
fight Elliott could mount at AT&T's annual meeting next year,
this person said. Elliott, one of the most prolific and aggressive
activists, previously waged proxy fights at Hess Corp. and Arconic
Shares of AT&T, which has a market value of about $275
billion, have done little in the past two decades despite a series
of major acquisitions by AT&T Chief Executive Randall
Stephenson and his predecessor, though they have rallied this year.
The stock currently trades near $38.
Last month, Elliott disclosed it had amassed a roughly 1% stake
in AT&T. In a letter, it challenged AT&T's leadership,
criticized its shift into the media business and called on the
company to review units that might not fit with its long-term
strategy including its DirecTV satellite division and Mexican
Mr. Stephenson said the company was already pursuing some of the
ideas advanced by Elliott and defended the company's media
strategy, including its takeovers of DirecTV and Time Warner. He
also defended the recent promotion of John Stankey, an AT&T
veteran, to the No. 2 role at the company, making him Mr.
Stephenson's heir apparent.
Mr. Stephenson, who has run AT&T for a dozen years, has
privately discussed stepping aside as CEO as soon as next year,
people familiar with the matter have said. The promotion of Mr.
Stankey spurred Elliott to go public with its campaign, The Wall
Street Journal has reported.
AT&T has said it was open to some of Elliott's suggestions,
such as repurchasing stock and selling noncore assets, but has
responded more cooly to others, such as giving the hedge fund a say
in management appointments.
After agreeing this month to sell its Puerto Rico operations,
AT&T signaled it would resume share repurchases in the fourth
quarter. The company has spent the lion's share of its free cash
flow over the past year on its dividend and on whittling down debt
accumulated from acquisitions. Its net debt surpassed $160 billion
earlier this year.
DirecTV, which AT&T bought in 2015 for $49 billion, has been
losing subscribers as consumers cancel their TV service. AT&T
ended the second quarter with 23 million U.S. pay-TV customers.
Analysts expect the company to report more than one million video
cancellations when it unveils its latest quarterly results.
AT&T's HBO Max streaming service will compete with Netflix
Inc. and other offerings in the works from Walt Disney Co., Comcast
Corp. and Apple Inc. The service, which will include HBO shows plus
Warner Bros. content like Cartoon Network shows and "Friends,"
isn't expected to launch until next year.
Write to Corrie Driebusch at email@example.com, Drew
FitzGerald at firstname.lastname@example.org and Dana Cimilluca at
(END) Dow Jones Newswires
October 17, 2019 17:34 ET (21:34 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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