Take-Two to shareholders: Reject EA bid

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Take-Two Interactive Software asked its shareholders Wednesday to shun an offer from Electronic Arts to buy the company for $26 a share, though executives made it clear that they anxiously await higher bids.

Take-Two chairman Strauss Zelnick said EA's $2 billion bid undervalues the company for several reasons, chief among them being that "Grand Theft Auto IV" won't hit store shelves until April 29 and that it is expected to be one of the year's biggest video games.

EA's bid is "opportunistically timed" to capture the value of that release at the expense of shareholders, Zelnick said.

"Our stockholders' interests would hardly be served by accepting an offer from EA at the wrong price and the wrong time," he said.

EA already has made its takeover intentions hostile, though Take-Two said Wednesday that it has instilled a "poison pill" provision that limits EA's options.

That agreement, Zelnick said Wednesday, "will not, and is not intended to prevent a takeover of the company on terms that are fair."

He added that the board has "received indications of interest" from other possible acquirers, but that "no substantive discussions have yet occurred." He said the company is assembling the materials necessary for potential bidders to conduct their due diligence, but he stressed that Take-Two doesn't want to engage in such discussions until after the release of "GTA IV."

EA first bid for Take-Two in mid-February when shares traded around $17, and it went hostile this month. While some investors quickly took profits, others have been holding out for a better offer. One money manager predicts the price will rise to as much as $34 a share.

On Wednesday, though, Michael Pachter of Wedbush Morgan Securities told clients that he thinks "the board has virtually no chance of finding a better offer."

That didn't stop Zelnick and Take-Two CEO Ben Feder on Wednesday from making their case at a Banc of America conference that Take-Two is worth more, telling analysts that they, and EA, underestimate the synergies that a merger would create, especially in sports games.

Zelnick said Take-Two is not a "one trick pony" completely reliant on the success of the "GTA" franchise. He said the company owns more than a dozen games that have sold a million units or more and he called their effort launched last year to create more family games "a terrific success."

Shares of Take-Two rose fractionally Wednesday to $25.91, while shares of EA fell 1.4% to $49.46.
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