It’s only Wednesday and already AT&T Inc. (NYSE: T) has made more than its share of news. A potential sale of the gaming business it acquired when it paid $109 billion for Time Warner, a layoff of some 4,700 workers and a mini-tender offer for shareholders to sell 4 million shares of stock to asset management firm Ponos Industries.
Taking the news items in order: last week CNBC reported that AT&T was discussing a sale of its Warner Interactive Entertainment gaming division in a deal that could bring in about $4 billion. The report noted that gaming giants Take Two Interactive Software Inc. (NASDAQ: TTWO), Electronic Arts Inc. (NASDAQ: EA) and Activision Blizzard Inc. (NASDAQ: ATVI) may be interested.
CNBC’s unnamed sources indicated that a deal is neither assured nor imminent. In the great scheme of things, $4 billion to reduce long-term debt of nearly $150 billion doesn’t seem like it would move the needle much on AT&T stock. Yet, if a licensing deal could be hammered out that would send some revenue AT&T’s way without the company having to spend any cash, it might be worth the trouble.
On Tuesday, the company notified its main union, the Communications Workers of America (CWA) that AT&T would be firing more than 3,400 technical and clerical workers over the next few weeks. The union also noted in a press release that AT&T plans to close permanently more than 250 AT&T Mobility and Cricket Wireless stores, throwing about 1,900 retail workers out of work.
CWA President Chris Shelton commented, “AT&T could help lead the country toward recovery [from job losses due to the COVID-19 pandemic] by partnering with its workforce to build next generation networks. Instead the company is adding to the pain of the recession already underway.” A local union president also noted that AT&T may be “pushing the work to low-paid contractors.”
Finally, AT&T on Tuesday recommended that shareholders reject the mini-tender offer from Ponos for 4 million AT&T shares. With more than 7 billion shares outstanding, 4 million is barely a rounding error, but AT&T is right to warn its stockholders.
Ponos is offering $36 per share, a premium of about 20% to AT&T’s share price of around $30 just before noon on Wednesday. However, the offer expires on July 10, and AT&T stock must exceed $36 a share by that time or investors who tender their shares could receive a below-market price for the stock.
A mini-tender offer, by definition, seeks to acquire less than 5% of a company’s outstanding shares. The U.S. Securities and Exchange Commission warns that these offers have been increasingly used to catch investors off guard. Many investors who hear about mini-tender offers surrender their securities without investigating the offer, assuming that the price offered includes the premium usually present in larger, traditional tender offers. They later learn, though, that they cannot withdraw from the offer and may end up selling their securities at below-market prices.
In April, Ponos made similar offers for a million shares of Exxon Mobil stock and 500,000 shares of Boeing stock. Ponos offered $48 a share to purchase Exxon stock trading at around $43 at the time of the offer. Boeing stock was trading at about $143 when Ponos launched its offer to pay $180 per share for the stock.
AT&T stock traded at $30.38 just before noon on Wednesday, in a 52-week range of $26.08 to $39.70. The consensus 12-month price target on the stock is $33.72, and the dividend yield is 6.76%.
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