Activist investor Paul Singer's Elliott Management on Monday disclosed a $3.2 billion stake in AT&T, and sent a letter to Chairman Randall Stephenson with a four-step plan to improve its share price and business.
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The New York-based hedge fund said it believes AT&T shares are worth $60 apiece – more than 65 percent above where they closed on Friday.
“The purpose of today's letter is to share our thoughts on how AT&T can improve its business and realize a historic increase in value for its shareholders,” the letter said. “Elliott believes that through readily achievable initiatives -- increased strategic focus, improved operational efficiency, a formal capital allocation framework, and enhanced leadership and oversight -- AT&T can achieve $60+ per share of value by the end of 2021.”
AT&T said in a statement to FOX Business that its management team and board of directors "maintain a regular and open dialogue with shareholders and will review Elliott Management’s perspectives in the context of the company’s business strategy."
"AT&T’s Board and management team firmly believe that the focused and successful execution of our strategy is the best path forward to create long-term value for shareholders."
AT&T on Monday hired Goldman Sachs to defend itself against Elliott, the New York Post says.
In its letter, Elliott voiced concerns about AT&T's $85 billion purchase of Time Warner, saying it has not yet articulated a “clear strategic rationale” for needing to own the company.
“While it is too soon to tell whether AT&T can create value with Time Warner, we remain cautious on the benefits of this combination,” Elliott said. “We think that, after $109 billion and three years, we should be seeing some manifestations of the clear strategic benefits by now.”
After acquiring Time Warner, AT&T’s debt load was around $180 billion. The company has been selling off assets to help pay down its debt, but Elliott thinks more needs to be done.
“AT&T has transformed itself into a sprawling collection of businesses battling well-funded competitors, in new markets, with different regulations, and saddled with the financial repercussions of its choices,” the fund said.
Elliott is making several attempts at shaking up companies around the world, including Sempra Energy, Nielsen Holdings and Pernod Richard SA.
“Through a focused strategic review, emphasis on operational best practices, a formal capital allocation framework, and enhanced leadership and oversight, AT&T has a unique opportunity to reverse the past decade of underperformance and embark upon a new period of extraordinary value creation,” the letter said.
“Beyond the significant share-price upside, the business benefit -- to again see a strong and thriving AT&T for customers, employees and everyone who depends upon this Company -- is also clear. If done successfully, the opportunity is historic.”