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The EA-Take Two saga roundup

As most of you have probably heard, EA recently attempted a less than friendly takeover of Take Two. Take Two refused the offer, and the past few days have been a flurry of analysis and news tidbits on the matter. Behind the jump lies our humble attempt to compile a comprehensive look at the topic as it stands today.

The story begins with a February 19th letter from EA CEO John Riccitiello to Take Two head Strauss Zelnick offering an all cash buyout of the company. EA offered 26$ a share for the company, which at the time amounted to a 60% premium over the trading price of Take Two stock. Take Two quickly responded, and soundly rejected the offer. Zelnick had this to say in an official statement.

Electronic Arts’ proposal provides insufficient value to our shareholders and comes at absolutely the wrong time… Thanks to the extraordinary efforts of our creative and business teams, Take-Two has made enormous strides in the past 10 months toward our common goal of being the most creative, innovative and efficient company in our industry…

Given the great importance of the Grand Theft Auto IV launch to the value of Take-Two, the Board has determined that the only prudent and responsible course for our Company and its stockholders is to defer these discussions until immediately after Grand Theft Auto IV is released.

Most of this story broke on Sunday, the 24th. When the markets opened Monday, Take Two suddenly seemed like an excellent buy, and the share price jumped considerably, up over 47% over its closing price on Friday. Trading volume of the stock also increased almost ten fold. By the time the markets closed on Monday, Take Two shares stood at almost 27$ a share, a 54% increase over its last closing price.

The latest development comes today with news that EA may attempt a shareholder led takeover of the Take Two board of directors at the company’s annual shareholder meeting. Gaming industry analyst Michael Pachter notes that according to Take Two corporate bylaws, the nominations must occur by the end of business today.

While this is a pretty big deal to the industry as a whole, why should you care? Aside from the obvious prize of Grand Theft Auto 4, Take Two also brings much more to the table for EA, as well as for consumers. Consider that 2K sports, EA’s main competition in the sports fields where it hasn’t obtained a licensed monopoly, is a subsidiary of Take Two. Michael Patcher believes that this is the real impetus behind the acquisition bid, and that GTA4 is simply the cherry on top. If EA is successful in its bid, they will essentially have no competition in the sports arena, which will undoubtedly be bad news for consumers. Do you think that EA will manage to pull this one off? If they do, how serious an impact will this be on the industry as a whole?

Thanks to the many people who contributed various sources for this story.

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23 comments on 'The EA-Take Two saga roundup'

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Comment by Jake on 2008-02-26 23:40:36 | Reply

Um, it wasn’t a hostile takeover attempt. You understand the difference, right?

Comment by Symbiot on 2008-02-27 00:00:21 | Reply

A hostile takeover is when a company tries to buy a controlling share of the company. If they own enough, they get control. That’s why it’s a hostile takeover.

It’s not hostile if you offer it to the company … let me explain economics to you.

If ea was attempting a hostile takeover, they would have to buy more shares of the company than any other shareholder. If said company owns those shares themselves, then a hostile takeover is impossible. It must be negotiated. This is why they offered Take to a 60% premium on their whares. And why this isn’t a hostile takeover.

In a hostile takeover, a company buys outstanding shares, or shares owned by the public.

Get it?

While it’s not hostile in the classic sense, it was an unsolicited and unwanted offer. The offending sentence has been changed to reflect that.

Comment by The_Glovner on 2008-02-27 14:59:07 | Reply

Don’t know how it works in the US, but this should surely be looked at the monopoly commission (if the US has something like that). Cause at the end of the day, handing EA a monololy on sports titles can only be a bad thing.

hilarious … I wasn’t per se offended … just clarifying for the confused above. Either way, the feedback is nice.
;)

Maybe it’s part of the plan to assimilate all developers into the Borg.

Comment by ManoDestra on 2008-02-27 05:13:05 | Reply

Careful what you say, EA are owned by the Illuminati. Oops! Who’s that at my door? Aargh!

Comment by StGermain on 2008-02-27 07:17:03 | Reply

Nah, I am their leader and we won’t have anything to do with a shitty company like that.

Comment by Veritas on 2008-02-27 07:16:18 | Reply

See, Mass, you should have stocks in these guys. They make good games AND money. :P

Comment by mass9 on 2008-02-27 18:05:37 | Reply

quote from gamedaily (yesterday)

“But one game industry veteran, who requested anonymity, predicted the deal will eventually go through, especially considering that Take-Two hasn’t posted an annual profit since 2005.”

Its simple opportunism on EA’s part. Their first offer was a premium on the share price and it was rejected. EA will make another bid.

The real question:
Do the execs at TakeTwo really think they can build a winner? Or, are they simply waiting for EA’s next offer to be more money so they can cash out their stock options and retire to a beach in the Carribean?

I’d bet on the latter as $2 Billion is an awful lot of money to say “NO” to…..

Comment by Veritas on 2008-02-27 21:43:14 | Reply

I’m hoping they’d have the integrity to be able to say “no” to that, though. I don’t want to see GTA go under.

Comment by The_Glovner on 2008-02-28 19:00:05 | Reply

The exec’s if they care about the company may well have the integrity to say no, unfortunately depending on the spread of shares from execs to private investor it may not matter a shit how much integrity they have.

Private investors (apologies mass) more often than not don’t give a tupenny flying fuck about the level of quality output from their investment, all they want to know is:

“How much does that equal in my pocket? Really? That much? Fuck em’, sell that bitch and show me the green.”

Comment by mass9 on 2008-02-28 19:32:14 | Reply

no offense taken.
Thats what an investment is all about.

My prediction is that the next offer will be made directly to the individual shareholders and not to the board. The board of Take Two would send a letter to the shareholders asking them to reject the offer, but if the premium is higher (much higher) than the actual share price they’d most likely take the money and run.

Especially considering the financial history Take Two has shown.

The only thing that makes this deal look less attractive from Take Two’s board POV is that the offer was a huge premium on the share price as of Feb-24. Since then, the shares have gone up (way up). While the offer still represents a premium on the share value, its not nearly as much as it was before the news leaked and the trading activity went through the roof.

Comment by Haggas on 2008-02-27 10:02:06 | Reply

What i say is put a filter in and bad all mention of ps3 in these boards, its a xbox 360 site ffs, not a ps3 site. who cares a f**k about the crappy ps3

Comment by flex on 2008-02-27 10:35:04 | Reply

Fuck off EA and fuck off PS3

Comment by UnGreat on 2008-02-27 10:59:18 | Reply

EA Executive: “A thousand game companies of the EA empire descend upon you. Our game patches will bring down the net!”

Take Two: “Then we will program offline.”

Comment by The_Glovner on 2008-02-27 14:55:44 | Reply

roflmfao!!!

Comment by dstrike on 2008-02-27 15:17:45 | Reply

Even if it were to be a sports game monopoly Congress could care less cause they are too busy blocking the Sirius/Xm merger. Once again the rich will become richer

I don’t believe US Monopoly Laws apply to entertainment …

Comment by The_Glovner on 2008-02-28 14:44:57 | Reply

Boo to the US then.

Comment by Yeah on 2008-02-27 19:18:59 | Reply

EA aquires Take Two, then announces the release of their own console in 2012. Hey, it could happen.

Comment by hombre1jp on 2008-02-27 20:33:03 | Reply

OK here is what will happen:
Ea will keep trying then eventually by years end they will get T2.
Then you will see Madden NFL ALL PRO FOOTBALL 2K9 !!!!!! OR
MLB:MVP TRIPLE PLAY 2K9 !!!!

SCREW EA SPORTS: EVERY TWO YEARS THEIR SPORTS GAMES GET BETTER, THEN THEY REHASH THE SAME GAME AND ADD CLEANER GRAPHICS…..etc….etc…

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