Shares of AT&T (T) fell in midday trading following reports that the company is eyeing a sale of its Warner Bros. gaming business, with CNBC and VentureBeat reporting different potential sale prices. The unit, known as Warner Bros. Interactive Entertainment, or WB Games, is known for publishing the "Batman: Arkham" series, "Middle-Earth: Shadow of Mordor," many "LEGO" and "Harry Potter" games, "Mortal Kombat," and "The Witcher 3: Wild Hunt."
WHAT'S NEW: On Friday, CNBC's Alex Sherman reported, citing people familiar with the matter, that AT&T is considering a sale of Warner Bros. Interactive Entertainment in a deal that could fetch roughly $4B. Take-Two (TTWO), Electronic Arts (EA), and Activision Blizzard (ATVI) have all expressed interest in acquiring the business, though no deal is assured or imminent, Sherman said.
Meanwhile, two sources confirmed the news to VentureBeat's Dean Takahashi, saying that the business is indeed up for sale. A source told Takahashi, however, that the price offered for the unit was $2B, with a "major game company" telling the publication that it was not interested in the purchase because WBIE only intermittently makes money, and does not own some of the major franchises at the core of its biggest titles.
WHAT'S NOTABLE: The news comes as NetEase (NTES) and WBIE earlier on Monday announced a strategic partnership for the development of mobile strategy game "The Lord of the Rings: Rise to War." "With NetEase, we have an excellent partner for The Lord of the Rings: Rise to War bringing gamers the mobile experience in this rich universe they are looking for," said David Haddad, President, Warner Bros. Interactive Entertainment. "This adaptation will unlock new opportunities for players to explore the iconic settings and characters of Middle-earth while utilizing their strategic skills in battle."
STREET RESEARCH: Following reports of a sale, Oppenheimer analyst Andrew Uerkwitz said he believes EA makes the "most sense" as a potential buyer of Warner Bros. Interactive due to its IP licensing experience, game portfolio lift, and robust balance sheet. While the unit also makes sense for Activision and Take-Two, the analyst sees major hurdles based on IP licensing concerns, companies' strategic priority, and financial profiles. Uerkwitz added that a Warner deal could accelerate consolidation in the video game industry, when demand for content grows with platform expansion and the number of independent AAA publishers declines.
Meanwhile, Stephens analyst Jeff Cohen said he would view the business as a strong acquisition for any of the big three publishers, adding that EA would be the best fit as a buyer. The analyst said that Activision and Take-Two would also be good fits, but both have spoken about the value of owning their intellectual property, while EA has displayed an ability to work with third-party IP and has a need for a boost in its mobile business. Cohen added that he believes a WB Interactive deal could set off a wave of M&A in the sector as publishers seek to gain scale ahead of the next console generation.
PRICE ACTION: At midday, AT&T shares were 0.8%, trading at $30.25.
AT&T
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Electronic Arts
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Take-Two
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acquired by MSFT
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NetEase
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