Activist investors Elliott Management Corp last week not only came unveiling a stake of $3.2 billion in AT&T but also urged the collapsing U.S. telecommunications and media conglomerate to halt its series of acquisitions and rather focus on business improvements.
AT&T has a market capitalization of $270 billion and with the current move by Elliott, after Microsoft and Apple, it become the one of the three largest companies being targeted by activist shareholders, who pushed the managements to make changes in the business strategies like selling off subsidiaries or in-house units, go for a buyback of shares or expand the board by adding more members to them.
U.S. President Donald Trump, who remained repeatedly criticizing the AT&T-owned U.S. cable news channel CNN, called the Elliott’s move “great news”.
Elliot Management is a New York-based hedge fund which is also counts among most successful activists in the world, and in its letter written to Dallas-based AT&T, Elliott suggested a four-part plan that it said could help AT&T increase price of its stock by at least 60% in coming two years.
The proposal varies from cutting costs by $5 billion, divesting some specific businesses, review its capital allocation procedure and suggesting CEO Randall Stephenson to stop acquiring more business units or companies.
For its M&A (Merger and Acquisition) strategy, AT&T is an outlier as most of the companies in today’s world no longer make conglomerates, Elliott said in its letter.
It is also possible that Elliott may push the AT&T for new directors having skills to operate and business specific expertise to join the company’s board which currently has 13 members on board, it said, noting that the investors in past have raised their concerns over the holding of both titles of chairman and CEO by Stephenson, who has led the company since the financial crisis.
AT&T is one of the biggest targets marked by the Elliott to date.