AT&T Defuses Hedge Fund Elliott Management Pressure With Three-Year Plan

Elliott Management expects AT&T to Hit $60 Per Share

Activist hedge fund Elliott Management took aim at AT&T Corporation in September.

Elliott had proposed cost cuts, divestment of certain businesses, and a freeze on further acquisitions. Now, the telecom giant has pushed back with a three-year plan to diffuse Elliott’s activist pressures.

The company announced plans to add two new board seats and split its chairman and CEO roles. Randall Stephenson will remain the firm’s chairman and CEO through next year (at least). However, the firm will proceed with a role split after his departure from the company.

The firm also said that it will not make any major acquisitions. That decision comes after Elliott’s criticisms of its deals for Time Warner and DirecTV.

AT&T also said it expects its asset sales to hit $14 billion this year. The firm had recently announced the sale of its Puerto Rico and U.S. Virgin Islands operations to Liberty Latin America for $1.95 billion.

Activist Hedge Fund Elliott Management and AT&T

On Monday, Bloomberg reported on AT&T’s plans. In a conversation with Roe Equity Research, analyst Kevin Roe praised the telecom giant’s ability to address Elliott’s concerns.

You’ve got to give credit to AT&T for quickly and proactively working with Elliott,” said Roe. “It is reassuring to see Stephenson committing to the CEO role through at least 2020, and the long-term guidance is long overdue extremely helpful to investors.”

The three-year plan arrives a day ahead of AT&T’s planned launch of its new streaming-video service. The firm will unveil new details about the service HBO Max on Tuesday.

What’s at Stake for Elliott

Meanwhile, Elliott Management controls about a $3.4 billion stake in AT&T Corp. In a statement, an Elliott executive praised the firm’s efforts.

“We commend AT&T for the positive steps announced today, which will create substantial and enduring shareholder value at one of America’s greatest companies,” said Elliott partner Jesse Cohn and portfolio manager Marc Steinberg. “It is clear to us that AT&T is committed to and accountable for creating shareholder value over the near- and long-term.”

Finally, the hedge fund projects that AT&T’s new plan will drive shares to $60 or higher. Therefore, that figure would represent about a 55% uptick from the current price of $38.66 per share.

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January 16, 2020

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