AT&T proposes reverse stock split

The statement, filed with the Securities and Exchange Commission, details issues that will be voted on at the next shareholder meeting, including specifics on a new business structure and further details on the Comcast merger. The meeting has not yet been scheduled but is expected to take place sometime this year.

AT&T proposed the reverse split to "adjust the trading prices of AT&T common stock following the various transactions to effect AT&T's restructuring plan, including the AT&T Comcast transaction," the company said in the SEC document.

Both companies recommend that shareholders vote in favor of the proposed merger of AT&T Broadband, AT&T's cable arm, and Comcast. The new company, to be called AT&T Comcast Corporation, may encounter regulatory difficulties. The merger would create a cable giant with over 21 million subscribers, which has caught the eyes of antitrust regulators.

Reverse stock splits have been typically used to pump up the value of stocks that are in danger of falling below the $1 limit necessary for listing on the Nasdaq. But AT&T's shares currently trade at around $14.47 a share. The reason the company opted for the 1-to-5 reverse split, according to analysts, was that once the AT&T-Comcast deal is complete, the remaining value of AT&T shares are only expected to be around $4.50.

"Anything under $10 is low for an institutional shareholder, under $5 is bad," said Dresdner Kleinwort Wasserstein analyst Bruce Roberts, who said such a low stock price would "lessen AT&T's ability to fund itself and issue more shares."

AT&T said Comcast shareholders will get one share of AT&T Comcast common stock in exchange for each Comcast share they own once the deal is complete. AT&T shareholders will receive about 0.35 shares in the new company for each AT&T share they own. That number, however, could change depending on the final exchange ratio.

Board members have approved the deal, which is expected to be completed barring any regulatory issues. Sural, a privately held investment company controlled by Comcast President Brian L. Roberts, holds around 86.7 percent of the combined voting power of Comcast shares and has agreed to vote in favor of the Comcast transaction.

A tracking stock, intended to reflect the value of AT&T's Consumer Services business, is expected to be distributed as a dividend to AT&T stockholders within a year, depending on market conditions, the company said.

AT&T has 16.4 billion shares of common stock and 100 million shares of preferred stock. Following the reverse stock split, AT&T will maintain the same number of preferred stock, 2.5 billion shares of authorized common stock, plus an additional 500 million shares of authorized common stock if the tracking stock is created.

In a separate announcement Wednesday, AT&T said that Frank Herringer, chairman of Transamerica, and Tony White, chairman of Applera, have joined its board of directors.