AT&T has announced a three-year action plan to improve overall performance and corporate governance as a result of engagement with activist investor Elliott Management.
The announcement puts an end to one of the largest campaigns of this year, which started just around six weeks ago with a lengthy public letter by Elliott critical of the company’s strategy. The sides engaged in a dialogue over the letter and a settlement was largely expected after the company postponed the release of its quarterly results in order to allow more time for negotiations.
The company committed to a capital allocation plan that includes a portfolio review, debt reduction initiatives and “no major acquisitions.” At the same time, the firm will refresh its board, with two directors retiring over the next 18 months, while current CEO Randall Stephenson will remain in the role through at least 2020.
“I’ve found our engagement with Elliott to be constructive and helpful, and I look forward to continuing those conservations (sic). These are smart people who very much appreciate the opportunity we have to create tremendous shareholder value,” Stephenson said in a statement.
Elliott applauded the changes, with the activist fund’s partner Jesse Cohn and Associate Portfolio Manager Marc Steinberg saying in a statement the moves “will create substantial and enduring shareholder value at one of America’s greatest companies.”
In 2019 alone, the firm said it aims to monetize $14 billion in non-core assets and $5 to $10 billion in 2020. The company already agreed to sell its Puerto Rico wireless and wireline assets for $1.95 billion and its stake in Central European Media Enterprises (CME) for $2.1 billion.
AT&T aims for revenue growth of 1% to 2% per year and adjusted EBITDA margin of 35%, 2 percentage points higher than the 2019 levels. A new director will be added at the next board meeting and another in 2020, with the board refreshment effort continuing beyond that.
Elliott had called on the company to halt its acquisition-led strategy and consider shedding non-core assets, including DirecTV, a broadcast satellite service provider that was bought for $67 billion in 2015 but is believed to be worth a fraction of that now as it has been losing subscribers. The activist also asked for capital discipline and “aggressive” deleverage, among other recommendations.
Shares in AT&T were up 2% in pre-market trading Monday.