Take-Two versus EA - Price Battle!!

Who really stands to win?

Posted by Staff
Take-Two versus EA - Price Battle!!
Do take-over target Take-Two's stock holders want the company sold? Do Electronic Arts' punters want out of the deal? Without asking all of them, we've only really got share trading to work on.

As of close of trade on the NASDAQ yesterday, it would appear that Take-Two's investors would be happy to see it sold. While those people trading in EA's certificates are less than assured.

Take-Two's share price soared following the publication of press releases from both itself and its suitor Electronic Arts on Sunday 24th closing up yesterday at $26.89 (£13.60) from the Friday's close of $17.36 (£8.80).

The rise in T2's share value puts it at slightly higher than EA's bid, which was $26 (£13.17) per share, or $1.9 billion (£967 million) for the lot.

EA's on the other hand stumbled, closing yesterday at $47.14 (£24.90) from the 'day before the press releases' or 'PR Sunday' as we've decided to call it, price of $49.84 (£25.25).

With the race for the pre-April 29th launch date of GTA IV now fully joined, today's trading on the NASDAQ will be telling. Much as both sides want to show the consumer that this is all about games, when it comes to the crunch, right now it's a question of hard, cold cash.

In a nutshell, if EA manages to get the sale through before April 29th, it gets the great big pile of GTA IV money. If not, it pays out and doesn't reap much in the way of immediate returns. It should be borne in mind, however, that questions regarding its ability to monopolise the sports video games market are now being raised. This was certainly the case during yesterdays analyst conference call to discuss the deal. Bear in mind that, for EA getting its hands on the 2K series of sports titles, which includes NHL 2K8, MLB Power Pros, NBA 2K8, College Hoops 2K8, All-Pro Football 2K8 and even World Poker Tour.

On a less finance-weighted and more, well, blood on the carpet level, the correspondence leading to the official revelation of Electronic Arts' bid displays just how aggressive this war has become. The April 29th GTA IV launch deadline is certainly concentrating minds on both sides.

Sunday 24th February (the above-mentioned, PR Sunday) saw both EA and Take-Two unleash press releases into the world, making public details of the deal thus far. The releases also made public a set of exchanges that indicate two men who don't want to blink first.

The letter rejecting EA's offer, sent by T2's executive chairman, Strauss Zelnick to EA's CEO, John Riccitiello, on February 22nd – two days before EA publicly announced its desire to acquire T2 – reads:

“I would like to note that if EA chooses to announce publicly the Board's proposal or announce any offer by EA to acquire the Company during this Quiet Period or if the contents of this letter become publicly available in sum and substance, the Company will consider all of its alternatives, including discussions with other parties, and further we will reserve the right to refuse to provide EA access to information or diligence.

“John, I believe I know you well enough to rely on your considering this proposal in the same good faith we have in making it. I look forward to your favorable response.”

EA, of course, went on to not only make public the details of its offer, but also to create a website specifically for the purpose of revealing the ins and outs of the communications between the two companies. Published on the site are a press release, the contents of Riccitiello's revised offer letter, an open letter from Riccitiello, an FAQ and a conference call on the subject.

Just two an a half weeks earlier, however, it was Riccitiello who stressed a desire for privacy in the discussions in his initial offer letter. Riccitiello wrote:

“We do not intend to make this letter public, and our offer will automatically terminate and be withdrawn in its entirety if any portion of this letter, or the existence of discussions between EA and Take-Two relating to a possible business combination, are disclosed to any person other than the directors and officers of Take-Two and its legal and financial advisors.”

Of course, by publishing the letters T2 has gone against what Riccitiello then indicated was his desire for privacy. Given the contents of eatake2.com, however, that hardly makes a difference now.

The letter rejecting EA's initial offer further highlights Take-Two's willingness to enter into discussions after the launch of GTA IV. Zelnick wrote:

“...the Board would be willing to commit to entering into a good-faith discussion with EA on April 30, 2008 to determine if we can reach common ground on the proper value of the Company and therefore an appropriate, mutually beneficial transaction. This would, of course, be subject to both parties reaching a mutually acceptable confidentiality agreement on customary terms. We are prepared to begin negotiating this confidentiality agreement immediately.”

EA's decision to go against Take-Two's wishes and air the dirty laundry surrounding the deal carries with it the threat of a hostile takeover, with EA either planning to go directly to shareholders or wishing to send the message to T2's board that it will.

Take-Two rejected EA's acquisition offer with claims that it has been undervalued.

You can read yesterday's coverage of the bullish takeover bid here.


Si Pie 26 Feb 2008 19:46
This is the most boring and yet interesting news in AGES! It's boring cos they're both suits being suity and who gives a crap about stocks and shares. But on the other side, EVERYONE gives a crap because of EAs track record of screwing perfecetly good things up big style. Will everyone's favourite crime-em-up drop Sprunk in favour of good ol' Diet Coke? Will the Maibatsu Monstrousity be replaced with the Toyota Hilux? Will the classic GTA soundtracks be replaced with a bunch of up-and-coming going-nowheres on EA trax?!?! Only time will tell...
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