Activist Investor Seeks Ouster of AT&T CEO Randall Stephenson, COO John Stankey

With AT&T spending more than $163 billion acquiring DirecTV and Time Warner (now WarnerMedia), the telecom remains challenged paying down debt and orchestrating a clear strategy for the combined assets in an age of cord-cutting.

That appears to be the gist why activist investor Paul Singer’s Elliott Management sent a 24-page letter to the AT&T board seeking executive changes, according to industry tip sheet “Byers Market”.

Paul Singer

In the letter, Singer contends AT&T’s shareholder returns have underperformed the S&P 500 by well over 100 percentage points over the past 10 years.

He said the share-price underperformance has occurred as AT&T’s M&A strategy has taken it into multiple new markets over a series of deals totaling nearly $200 billion, and as its operational performance has measurably declined.

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As a result, AT&T, according to Singer, is “deeply undervalued,” trading at just over half the multiple of the S&P 500 — by far its biggest discount yet.

Singer, who owns a $3.2 billion stake in AT&T, is known for taking stakes in publicly held companies and firing off letters to the board in hopes of exacting executive change — which often occurs.

About AT&T, Singer reportedly seeks the removal of CEO Randall Stephenson and COO John Stankey (who is also CEO of WarnerMedia) regarding the former’s merger & acquisition strategies.

Specifically, Singer contrasts AT&T’s M&A strategy with former Time Warner CEO Jeff Bewkes.

“When Bewkes took over Time Warner as CEO, he inherited a sprawling company with numerous related but non-core assets — AOL, Time Warner Cable, a collection of publishing assets and other smaller businesses,” read the letter. “He then spent the following decade divesting the non-core assets in order to focus on Time Warner’s leading content franchises.
This strategy paid off: Time Warner became both a flourishing media enterprise and a strong investment, returning more than double the S&P 500’s ~140% return during Bewkes’ 10-year tenure.”

Singer called on the board to evaluate (i.e. sell off) assets such as DirecTV, AT&T’s Mexico operations and U.S. wireline (pay-tv) platform (U-verse) platforms, among others.

In a response, AT&T’s board said it would review the letter, adding the company has already implemented many of the changes outlined by Singer.

The letter comes following the surprise retirement of John Donovan, CEO of AT&T Communications, and the Sept. 3 promotion of Stankey to COO.

Singer, in the letter, said he remains “cautious on the benefits of the [Time Warner, DirecTV] combination.”

Indeed, AT&T’s rollout of standalone online TV service, DirecTV Now, has seen the platform jettison hundreds of thousands of subscribers after it began ending the service’s initial $34.99 monthly fee. The service has been rebranded to AT&T TV.

The telecom has big plans for the launch of HBO Max, a SVOD platform intended to compete with Netflix, Amazon Prime Video, Disney+ and Apple TV+, among others.

At the same time, Max would appear to signal the end for HBO Now, the four-year-old SVOD service with less than 6 million subscribers.

Barnes & Noble Completes Sale to Private Fund Manager

Barnes & Noble, America’s largest brick-and-mortar bookseller, Aug. 7 announced the successful closing of its $683 million acquisition by Elliott Advisors Limited, a private fund manager located in the United Kingdom.

Elliott’s purchase follows its 2018 acquisition of Waterstones, the largest retail bookseller in the U.K.

Barnes & Noble operates 627 retail stores across all 50 states, where it remains the #1 retail bookseller in the U.S. The retailer also operates BN.com website as well as Nook tablet business, which includes the sale of digital movies and TV shows.

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Elliott seeks to deploy the same strategy it claims turned around Waterstones in an age of ecommerce and Amazon. Elliott will own both Barnes & Noble and Waterstones and, while each bookseller will operate independently, James Daunt, CEO of Waterstones, will serve as CEO of both companies and relocate from London to New York.

“This is a very good day for bookselling,” Daunt said in a statement.

“Barnes & Noble is the greatest of all bookstore names and will now benefit from the support of an owner committed to physical bookselling. With investment and concentration on the core principles of good bookselling, the prospects for this extraordinary company are bright.”

Paul Best, portfolio manager and head of European private equity at Elliott, said the $38.2 billion fund remains committed to bookselling and “real” bookstores.

“Barnes & Noble has an extraordinary heritage, one that we want to protect and grow,” Best said.

As a result of the merger, Barnes & Noble becomes a privately held subsidiary of Elliott and will cease trading on the New York Stock Exchange.

Daunt’s honeymoon could be short-lived.

Barnes & Noble generated a $18.3 million net loss in its most-recent fiscal period, with same-store sales down 2.3%. Quarter sales topped $755 million and $3.6 billion for the fiscal year, down 3.9% and 3% from the prior year periods, respectively.

Barnes & Noble Narrows Q4 Loss, Posts Fiscal-Year Profit

Barnes & Noble, which has accepted a $683 million offer from a private equity fund manager, June 19 said it generated a fourth-quarter (ended April 27) loss of $18.3 million, down from a net loss of $21.1 million during the previous-year period.

The nation’s largest brick-and-mortar bookstore, which operates 627 stores in 50 states, said same-store sales dipped 2.3% in the quarter and 1.9% for the fiscal year.

Total quarterly sales were $755 million and $3.6 billion for the fiscal year, decreasing 3.9% and 3% from the prior year periods, respectively.

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quarterly sales, which include digital sales of movies and TV shows, narrowed 17.4% to $20.7 million from $25 million last year.

Fiscal 2019 net earnings were $3.8 million compared to a net loss of $125.5 million in the prior year.

Excluding non-recurring or unusual charges, pre-tax earnings topped $4.6 million in the quarter, as compared to $6.7 million a year ago, and $147.2 million for fiscal 2019, as compared to $145.4 million a year ago.

Barnes & Noble said it reduced expenses by $50.4 million during fiscal 2019, excluding non-recurring or unusual charges.

The retailer on June 7 entered into an agreement to be acquired by funds advised by Elliott Advisors (U.K.) Limited. If the deal is consummated, B&N is expected to be privately held.

 

 

Barnes & Noble Investor Wants More Money for Bookseller

An investor holding a 3.4% stake in Barnes & Noble is urging the bookseller’s board to consider more lucrative offers for the country’s largest brick-and-mortar bookstore.

The fiscally-challenged chain, which sells DVD/Blu-ray Disc movies, in addition to digital content through its Nook subsidiary, earlier this month accepted a $478.8 million offer ($683 million including debt) from private fund manager Elliott Management.

Book distributor Readerlink LLC then disclosed it was working on a superior bid.

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Richard Schottenfeld, who reportedly ranks among the chain’s top 10 investors, in a June 13 filing said he believes Barnes & Noble is worth “considerably more” than the agreed-upon sale price, and believe that the special committee, including its chairman, Mark Carlton, “has failed in its duty to maximize value for shareholders.”

Schottenfeld’s action could be too late.

Should B&N renege on the acquisition, it would owe Elliott a $4 million break-up fee. That amounts balloons to $17.5 million after June 13.

Report: Readerlink Eyeing Higher Offer for Barnes & Noble

Barnes & Noble has accepted an $683 million acquisition offer (including debt) from private equity firm Elliot Management.

Now that offer could be in question following a report Readerlink LLC, an Oak Brook, Ill.-based book distributor, is considering placing a superior counter offer for Barnes & Noble.

The Wall Street Journal, citing sources familiar with the situation, said a potential bid would exceed Elliott’s $6.50-per-share offer. Indeed, B&N shares closed June 10 at $6.80 per share on the news.

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Readerlink has until June 13 to submit a formal bid.

Should Barnes & Noble, which also sells digital movies through its Nook subsidiary, in addition to DVD/Blu-ray Disc titles in stores, strike another deal, it would be on the hook to Elliott for $4 million break-up fee – an amount that balloons to $17.5 million after June 13.

Barnes & Noble Being Acquired by Private Fund Manager for $683 Million

As expected, Barnes & Noble, the nation’s largest brick-and-mortar bookstore, June 7 disclosed it is being acquired by Elliott Management Corp. for $683 million, including debt.

The private fund manager, which acquired Britain’s largest bookstore Waterstone in 2018, will return Barnes & Noble to privately-held status, ending Wall Street scrutiny on a company that has lost more than $1 billion in market value in the past five years.

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Waterstone CEO James Daunt will manage Barnes & Noble operations as a separate entity.

Founded in 1965, Barnes & Noble, which includes the Nook tablet and digital media business, saw  a 1.1% increase in same-store winter holiday sales, its best fiscal result in three years. At the same time, the company had just $15 million in available cash.

The company, like a lot of traditional retailers, has struggled to compete with ecommerce, notably Amazon. Indeed, the online retail behemoth reportedly accounts for about 50% of all book sales, with Walmart at 4.2%.

The deal is expected to close by the third quarter.