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AT&T Puts Warner Gaming Division on the Block for $4 Billion

By Danny Vena – Jun 15, 2020 at 11:25AM

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The company may be looking to pare down its massive debt load.

AT&T (T 3.65%) is reportedly looking to sell off its Warner Bros. Interactive Entertainment gaming segment for as much as $4 billion, according to a report by CNBC

Some of the world's biggest video game makers have thrown their hats in the ring as potential suitors. Activision Blizzard (ATVI 0.03%), Take-Two Interactive (TTWO 4.00%), and Electronic Arts (EA 3.59%) have all expressed interest, though no deal is assured or imminent, according to the report.

Two teens on a couch using hand controllers to play a video game.

Image source: Getty Images.

Many of the unit's video games are tied to intellectual property (IP) owned by AT&T, including Harry Potter, Game of Thrones, The Lego Movie, and the Batman: Arkham series, but also boasts other popular titles, including Mortal Kombat and the Scribblenauts series. This could complicate any potential arrangement, as it might result in a commercial licensing agreement for AT&T's IP, giving the company a cut of any future revenue.

AT&T acquired Time Warner for $85 billion in June of 2018, taking on a significant amount of debt to finance the purchase. The company's total debt has ballooned to more than $164 billion to close out the first quarter of 2020. Early last year, CFO John Stephens said the company would focus on paying down debt.  

The pressure to decrease its debt load mounted last year when activist hedge fund Elliott Management acquired a $3.2 billion stake in the company, pressuring the company to lower costs, divest non-core businesses, and pay down debt. 

The COVID-19 pandemic has been particularly challenging for debt-laden companies like AT&T, who have struggled to increase liquidity in the face of balance sheets that are already highly leveraged.

Danny Vena owns shares of Activision Blizzard and Take-Two Interactive and has the following options: long January 2021 $22.50 calls on Activision Blizzard. The Motley Fool owns shares of and recommends Activision Blizzard and Take-Two Interactive. The Motley Fool recommends Electronic Arts and recommends the following options: long January 2022 $75 calls on Activision Blizzard and short January 2022 $75 puts on Activision Blizzard. The Motley Fool has a disclosure policy.

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Stocks Mentioned

AT&T Inc. Stock Quote
AT&T Inc.
T
$15.90 (3.65%) $0.56
Electronic Arts Inc. Stock Quote
Electronic Arts Inc.
EA
$119.86 (3.59%) $4.15
Take-Two Interactive Software, Inc. Stock Quote
Take-Two Interactive Software, Inc.
TTWO
$113.36 (4.00%) $4.36
Activision Blizzard, Inc. Stock Quote
Activision Blizzard, Inc.
ATVI
$74.36 (0.03%) $0.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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