AT&T is considering selling its Warner Bros. Interactive Entertainment Gaming Group to the tune of about $4 billion, CNBC disclosed on Friday. Electronic Arts, Take-Two Interactive Software, and Activision Blizzard all showed interest in buying the unit, CNBC was told by people with knowledge of the possible deal.
It's not a guaranteed deal at the moment as AT&T, EA and Take-Two declined to comment. Activision Blizzard did not respond immediately to a request for comment.
One option for a deal could include a commercial licensing contract that would enable AT&T to continue driving its intellectual property sales, CNBC disclosed.
However, VentureBeat disclosed a separate source that suggested a price nearer $2 billion as the gaming division doesn't own some of the major franchises at the center of its big ticket games such as "Harry Potter" and "Game of Thrones."
Warner Interactive Entertainment is comprised of ten game studios that include TT Games, and owns the series "Mortal Kombat" and "Scribblenauts." It was snapped up by AT&T as part of Time Warner's $109 billion agreement that closed in 2018 and left AT&T having difficulties to manage a $150 billion debt.
John Stankey, the former WarnerMedia chief executive officer, is poised to take the position that Randall Stephenson left as AT&T's new chief executive on July 1. Stankey may look to divest assets after Elliott Management, an activist hedge fund, took a stake of $3.2 billion in 2019, calling for divestitures and changes in leadership.
Elliott called on AT&T to divest non-core assets like DirecTV, which was not in favor of pursuing a Stankey deal. Stankey said during Morgan Stanley's Technology, Media & Telecom Conference in March that the group focuses on a lot of research around portfolio rationalization.
Warner Bros. Interactive also owns major gaming titles including Harry Potter: Wizards Unite. AT&T completed its buyout of Time Warner in 2018, which led to the company acquiring several properties including Warner Bros. and HBO.
Shares of AT&T are currently trading down 22 percent year-to-date, with AT&T recently announcing soft earnings in the first three months alongside ~$433 million ($0.05 a share) of EBITDA headwinds as a result of the coronavirus disruptions.
Take-Two shares were down 0.7 percent to $134.00, Electronic Arts shares declined 0.4 percent to $121.97, and Activision shares were up 0.6 percent to close at $71.68.
AT&T will continue to reduce its expenses and is targeting $6 billion over the next three years, Oppenheimer analyst Timothy Horan, who has a buy rating and $47 price target on the stock, said.
