AT&T, Elliott make peace and stock jumps

AT&T is on track for its biggest percentage increase in over two years after reaching a truce with the hedge fund Elliott Management.

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TickerSecurityLastChangeChange %
TAT&T INC.39.50+0.55+1.41%

AT&T on Monday committed to stock buybacks and said it would add two new members to its board of directors, appeasing Elliott, which had acquired a $3.2 billion stake and called on the company to cut costs, pay down debt and sell assets, including DirecTV.

The deal, which AT&T says will drive “significant growth in EBITDA margins and EPS,” calls for the company to continue investing in growth areas while retiring shares and paying down debt. AT&T says it will retire 100 percent of acquisition debt from the $85.4 billion Time Warner deal retired by 2022.

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Even before Monday’s announcement, it appeared that AT&T was looking to make Elliott happy. The telecom company earlier this month said it was selling $2 billion worth of assets in Puerto Rico and the Virgin Islands to Liberty Latin America.

“The objectives we have outlined today have been central to our plans for many months, even before we closed our acquisition of Time Warner. But, as you would expect, our thinking has also benefited from our engagement with our owners, including Elliott Management,” said AT&T chairman and CEO Randall Stephenson.

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“I’ve found our engagement with Elliott to be constructive and helpful, and I look forward to continuing those conversations. These are smart people who very much appreciate the opportunity we have to create tremendous shareholder value" he added.

In a statement released Monday, Elliott partner Jesse Cohn and associate portfolio manager Marc Steinberg commended AT&T for taking “positive steps” which they say will “create substantial and enduring shareholder value at one of America’s greatest companies.”

They said the deal will help AT&T realize earnings of $4.50 to $4.80 a share by 2022. The company expects to earn $3.60 to $3.70 in fiscal year 2020.

“We thank Randall, Matt and the rest of the team for their constructive collaboration and leadership, and we are looking forward to close, ongoing engagement as the Company executes on these strategic, operational and portfolio initiatives,” Cohn and Steinberg said.

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AT&T shares were up more than 29 percent this year, including Monday's gain.