AT&T is in discussions with Elliott Management, according to a report in the Wall Street Journal, citing unnamed sources.
Six weeks ago, Elliott sent a lengthy letter to AT&T’s board of directors criticizing numerous aspects of the carrier’s business and its management. Recently, AT&T delayed the release of its quarterly earnings, spurring rumors that it wanted to make some significant changes before talking to investors. The company is now scheduled to release its Q3 earnings on October 28.
One of Elliott’s biggest complaints was about AT&T’s $49 billion acquisition of DirecTV in 2015. The activist investor said AT&T’s timing was horrible and that “unfortunately, it has become clear that AT&T acquired DirecTV at the absolute peak of the linear TV market.”
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Elliott’s $3.2 billion stake in AT&T is only about 1% of the company’s total market value. But Elliott has a reputation for strong-arming other companies, and winning.
The Wall Street Journal reports that AT&T has hired bankers at Centerview Partners and Goldman Sachs Group in the talks with Elliott to examine ways to increase the carrier’s stock price. Apparently, Elliott has also submitted a list of new candidates for AT&T’s board of directors, according WSJ sources. If the talks fall apart, Elliott could potentially mount a proxy fight at AT&T’s annual meeting next year.
Meanwhile, the Communications Workers of America (CWA) has weighed in on the controversy, saying that Elliott’s “vulture capital” tactics are so outdated and will simply result in the layoffs of thousands of Americans to the enrichment of a few big investors.
“Elliott Management has taken the obsession with shareholder value to an extreme, pushing proposals that in the end benefit only a small subset of shareholders - themselves,” said CWA President Chris Shelton in a statement.
One of Elliott’s complaints was that AT&T needed to unload “distracting” businesses to repay debt and invest in its highest-value strategic initiatives. Elliott listed some potential candidates for divestment, including DirecTV, its Mexican wireless operations, its home security business, and its Puerto Rican operations.
And in fact, AT&T just recently announced that it was selling its wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands to Liberty Latin America. The $1.95 billion cash sale includes spectrum and real estate, along with 1.1 million wireless subscribers.