AT&T Mulls $4 Billion Sale Of Gaming Division- Report
AT&T (T) is considering selling its Warner Bros. Interactive Entertainment gaming unit for around $ 4 billion to alleviate the high debt burden, the people familiar with the matter told CNBC.
Potential buyers, according to sources, include the major gaming companies Take-Two Interactive Software (TTWO), Electronic Arts (EA) and Activision Blizzard (ATVI). However, they added that no agreement could be reached at this point.
An option for a deal could be a commercial license agreement that would allow AT&T to further increase its intellectual property revenue, CNBC reported.
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VentureBeat, however, reported a separate source that suggested a price close to $ 2 billion because the gaming division does not own some of the major franchises at the core of their big games like "Harry Potter" and "Game of Thrones".
Warner Bros. Interactive Entertainment consists of 10 game studios, including TT Games, and owns the "Mortal Kombat" and "Scribblenauts" series. It was borrowed from AT&T as part of the $ 109 billion Time Warner deal, which closed in 2018 and made it difficult for T to manage $ 150 billion in debt.
John Stankey, former WarnerMedia CEO, will replace Randall Stephenson as CEO at AT&T on July 1. In a particularly challenging time, he takes over the helm of the second largest mobile operator in America.
T's shares are currently down 22% since the beginning of the year. AT&T recently reported weak first quarter earnings and an EBITDA headwind of ~ $ 433 million ($ 0.05 per share) due to COVID-19 disruptions.
"AT&T will continue to cut spending and is targeting $ 6 billion over the next three years," said Timothy Horan, an analyst at Oppenheimer. He has a buy rating and a target price of USD 47 for the share and explains: "It is important that the dividend appears safe and that the debt reduction can be continued with a dividend ratio estimated by us and the company of 60%."
Overall, analysts have a moderate buy-T consensus with 8 current buy ratings, 12 holds and 2 sells. The average price target for analysts of USD 34 indicates an upside potential of 11% compared to the current level. (See T-share analysis on TipRanks).
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