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Elliott Appears to Revert to Old Form -- WSJ

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09/10/2019 | 02:48am EDT

By Corrie Driebusch

Elliott Management Corp., one of the most ambitious and aggressive activist investors, has set its sights on one of its biggest targets yet in picking a fight with AT&T Inc.

The New York hedge fund is known for campaigns against Peru and Argentina, pressuring the countries to make payments on defaulted bonds, and for battles with companies such as Arconic Inc.

Activist investors take stakes in public companies and push for changes with the aim of lifting the target's stock price. Elliott, founded by billionaire Paul Singer, is one of the most flush of these investors, managing roughly $38 billion, and one of the most prolific. Last year, Elliott launched the equivalent of nearly one new public activism campaign every two weeks, making it the busiest such investor for the second year in a row, according to Activist Insight.

Some of its clashes have turned nasty. In the fight with Arconic, the industrial-parts maker formerly known as Alcoa, then-Chief Executive Klaus Kleinfeld abruptly departed after he sent an unauthorized letter to Elliott. At Athenahealth Inc., the software company's chief CEO stepped down and apologized for domestic abuse, more than a decade prior, which became public during the campaign. Elliott denied any part in bringing the information to light.

The firm has recently tried to take a more collaborative approach with some companies in which it has taken stakes, according to some activist-defense advisers. The image shift fits into a broader trend of companies becoming more welcoming of activists and awarding them more board seats. When Elliott said it had made an investment in technology giant SAP SE in April, it praised the German company's plans to increase profit margins. Jesse Cohn, who runs U.S. equity activism at Elliott, recently joined the board of eBay Inc. as part of a settlement. Elliott is pushing the online retailer to sell some of its business units.

In its AT&T campaign, made public Monday, Elliott appears to revert more to prior form. Elliott made its intentions known to AT&T management only recently, even though, according to a person familiar with the matter, the campaign was months in the making. Elliott's public letter criticized AT&T CEO Randall Stephenson, called out the company for elevating WarnerMedia CEO John Stankey as AT&T's new president and chief operating officer without "conducting a thorough search" and questioned recent acquisitions.

"AT&T's M&A strategy has not only contributed directly to its profound share price underperformance, but has also caused distractions that have contributed to the company's recent operational underperformance," Elliott said in its letter.

The AT&T move caps a relatively quiet stretch for Elliott, which has had a slower-than-usual year so far. It has publicly launched seven campaigns, two fewer than rival Starboard Value LP, Activist Insight data show.

Elliott has had mixed success over the years, and some of its recent public campaigns have floundered. Arconic rejected Elliott's bid with a private-equity firm to buy the company in January, while a push to get TV-ratings company Nielsen Holdings PLC sold has dragged on for over a year. Meanwhile, Elliott's offer to buy oil-and-gas company QEP Resources Inc. fell through. Since Elliott announced a stake in Nielsen a little over a year ago, its stock has fallen 1.4%, while QEP shares have fallen more than 40% since the fund's stake was revealed in February 2018.

Others have fared better. EBay is up 26% since Elliott revealed it took a stake in January.

Beyond its size and activity, Elliott differentiates itself by implementing its activist campaigns through both equities and debt and isn't afraid to venture outside the U.S. It owns stakes in companies such as France's Pernod Ricard SA and Germany's Bayer AG. Elliott has also in recent years put more focus on purchasing companies outright, recently closing a deal to buy bookstore chain Barnes & Noble Inc.

Write to Corrie Driebusch at corrie.driebusch@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
ALCOA CORPORATION 6.11% 21.54 Delayed Quote.-18.96%
ARCONIC INC. -2.49% 27.01 Delayed Quote.60.20%
AT&T 1.75% 38.47 Delayed Quote.34.79%
BARNES GROUP INC. 0.63% 52.77 Delayed Quote.-1.59%
BAYER AG -1.11% 65.24 Delayed Quote.7.73%
E.ON SE -0.36% 8.799 Delayed Quote.1.99%
EBAY INC. -0.69% 38.82 Delayed Quote.38.30%
EURO / ARGENTINE PESO (EUR/ARS) 0.49% 65.056 Delayed Quote.49.80%
LONDON BRENT OIL -0.97% 59.29 Delayed Quote.9.05%
NIELSEN HOLDINGS PLC 1.31% 20.88 Delayed Quote.-10.50%
PERNOD RICARD 0.85% 161 Real-time Quote.12.35%
QEP RESOURCES, INC. -8.45% 2.71 Delayed Quote.-51.87%
SAP AG -0.16% 115.82 Delayed Quote.33.23%
US DOLLAR / ARGENTINE PESO (USD/ARS) 0.01% 58.167 Delayed Quote.54.54%
WTI -0.48% 53.67 Delayed Quote.16.30%
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Financials (USD)
Sales 2019 182 B
EBIT 2019 30 738 M
Net income 2019 18 365 M
Debt 2019 156 B
Yield 2019 5,32%
P/E ratio 2019 15,4x
P/E ratio 2020 13,2x
EV / Sales2019 2,40x
EV / Sales2020 2,36x
Capitalization 281 B
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Mean consensus OUTPERFORM
Number of Analysts 29
Average target price 37,26  $
Last Close Price 38,47  $
Spread / Highest target 24,8%
Spread / Average Target -3,15%
Spread / Lowest Target -48,0%
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Managers
NameTitle
Randall L. Stephenson Chairman, President & Chief Executive Officer
John J. Stephens CFO, Principal Accounting Officer & Senior EVP
Laura D'Andrea Tyson Independent Director
Matthew K. Rose Lead Independent Director
Scott T. Ford Independent Director
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