Points slow to come in EA game

Take-Two to comment on $2 bil hostile takeover bid

Wall Street isn't contemplating competing takeover bids for Take-Two Interactive Software as the video game company's board is expected to make a formal comment within a week on a tender offer by Electronic Arts.

EA took its $2 billion, or $26 per share, offer to Take-Two shareholders last week, making for the first hostile takeover play that gaming industry analysts have experienced.

"I don't remember ever seeing a hostile bid," Wedbush Morgan Securities analyst Michael Pachter said.

When such a tender offer is made, the target company's board must under regulatory rules notify shareholders of its position on the tender offer within 10 business days. Take-Two officials declined comment ahead of the upcoming formal reaction.

Analysts have argued that Take-Two shares will remain range-bound given the little likelihood that EA will sweeten its offer.

"I don't think shareholders have much leverage," Pachter said.

Said BMO Capital Markets analyst Edward Williams: "Take-Two shareholders should tender their shares to EA as, in our view, there is a low probability of a higher offer from another company. Given current market conditions, we believe a cash offer that would lock in a 40% year-to-date return for Take-Two shareholders (versus a decline of 11% for the S&P 500) represents an attractive opportunity for Take-Two shareholders."

Pachter also doesn't see any sense in a counterbid from another gaming or even entertainment firm given that EA can cut overhead costs and consolidate both firms' strong sports franchises.

"Other publishers can wipe out overhead but don't get the same benefit from consolidating sports," he said.

Observers also have said that they don't expect the EA play for Take-Two to immediately force other sector players into consolidation mode, even though many have predicted further mergers over time. Media and entertainment companies have widely argued that they prefer operating in the video game business without buying one of the sector players.

Some, in fact, have wondered why EA has chosen to chase Take-Two now given that the U.S. could be in recession and the stock market could fall further. But according to recent data, there is no recession in the gaming business, with NPD Group figures released this week citing February sales of hardware and software at $1.3 billion, 34% higher than the same month a year ago.

NPD also noted that there are several hot titles coming, a fact that should keep software and even hardware sales humming. One of those titles is "Grand Theft Auto IV," due April 29 from Take-Two's Rockstar Games, and EA would like to strike a deal for Take-Two before "GTA IV" hits the shelves.

Take-Two shares on Wednesday closed down 1.4% at $24.92.

Georg Szalai reported from New York; Paul Bond reported from Los Angeles.
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