The board of Take-Two Interactive has fired off another salvo in its war with Electronic Arts. It has told stockholders that EA's current offer of $26 (£13) per share is "inadequate" and opportunistic. At the same time, however, it has also left the door open for a "business collaboration" with the same company it rejected.
The official line is:
"The Board also confirmed that it will explore alternatives to maximize value for stockholders, which may include a business combination with third parties or with EA, remaining independent, or other strategic or financial alternatives that could deliver higher stockholder value than the current EA offer."
With the kicker being:
"Prior to the release of Grand Theft Auto IV, the Company is willing to enter into confidentiality agreements on customary terms and to engage in preliminary conversations (not in the Company's view amounting to negotiations) with interested parties, including EA.
"The Board of Directors believes that tendering Shares into the EA Offer before the Board of Directors and its advisors have had the opportunity fully to explore alternatives to the EA Offer could preclude its ability to effect an alternative transaction that could provide superior value to the Company's stockholders.
This is the first time that Take-Two has made it clear to its shareholders that it would be prepared to work with Electronic Arts. It is quite obviously a peace offering to existing and prospective shareholders who are waiting for the April 11th deadline set by the Electronic Arts for its all-cash tender. Rather than an admission that the existing board can't steer Take-Two without third-party help, it is a call to other suitors to take a chunk of the company - which will stop EA buying the entire shooting match. Basically, if the latter happens, it is incredibly unlikely that Take-Two's current board will retain their seats.
No surprises there then. For the record, so far today, the T2 shares peaked at $26.05 on the NASDAQ.
Quoting Take-Two directly:
"Strauss Zelnick, Chairman of the Board of Take-Two, commented, 'Take-Two's Board of Directors and senior management team were put in place less than one year ago with one mandate: maximize stockholder value.
'"We have maintained a single-minded focus on that goal ever since and it remains the guiding principle in every decision we make with regard to Take-Two.
'"Our Board, after careful review, has unanimously determined that Electronic Arts' offer continues to provide insufficient value and remains opportunistically timed to capture the value of the upcoming Grand Theft Auto IV launch at the expense of our stockholders.'"
So, as everybody knew from the off, the "It's all about the games" line emanating from the New York offices of Rockstar's parent company is quickly translated into 'maximize stockholder value'". Of course, good, imaginative games sell more copies than, for example, movie tie-ins or popular brand extensions. Selling more games maximises stockholder value? Or are we being naive? Surely mediocre games, made in code farms with low-overheads and high yields maximise that value?
That's an argument for economists and financial analysts.
As well as spurning the EA offer, Take-Two also "Filed a supplement to the proxy statement with the SEC to moot any claims alleged in a class action lawsuit that the proxy statement was misleading and incomplete". The class action suit in question was filed by Patrick Solomon in March (details here
As if this was not enough, the board has also "Changed the date and time of the 2008 Annual Meeting to Thursday, April 17, 2008 at 6:30 p.m. (New York City time)". This change takes the meeting from April 10th - the day before the deadline given by EA for the acceptance of its all-cash offer.
Leaving the April 10th date in place would have placed the board of Take-Two in jeopardy of a shareholder revolt on the day. The pressure of missing out on the EA offer could have been too much for many shareholders.
This change could force EA to move the deadline.Time LineMarch 7, 2007 - First news of Take-Two shareholder revolt as Zelnick Media is touted as saviour.
March 27, 2007 - http://spong.com/article/12161
- Take-Two postpones board meeting. First mention by SPOnG of Electronic Arts as potential buyer.March 30, 2007 - New Take-Two board appointed. Strauss Zelnick and Ben Feder take the reins.April 5, 2007 - Securities and Exchange Commission begins investigation into Take-Two stock optioning.April 10, 2007 - Take-Two's chief financial officer, Karl Winters, resigns with immediate effect.August 3, 2007 - Grand Theft Auto IV delayed until 2008.November 12, 2007 - Take-Two makes an out of court settlement regarding the Grand Theft Auto: San Andreas Hot Coffee 'affair'.December 19, 2007 - GTA IV'sApril 2008 launch date is mooted.January 24, 2008 - April 29th 2008 confirmed as GTA IV launch date.
February 15, 2008 - Strauss Zelnick writes to John Riccitiello rejecting EA's initial bid.February 15, 2008 - Take-Two officially appoints Straus Zelnick as Executive Chairman.
February 19, 2008 - John Riccitiello responds to Strauss Zelnick.
February 22, 2008 - Strauss Zelnick responds to John Riccitiello.
February 24, 2008 - John Riccitiello publishes open letter regarding EA's bid.February 25, 2008 - Take-Two board officially rejects Electronic Arts' bid.March 11, 2008 - Take-Two board files new, defensive, employment termination plan with SEC. Shareholder Patrick Solomon files suit against board for 'breach of fiduciary duty'.March 12, 2008 - Take-Two reports year-on-year loses for the first financial quarter.March 13, 2008 - EA issues official, all-cash tender offer.March 13, 2008 - Take-Two alters timetable to consider EA offer.March 26, 2008 - Take-Two advises shareholders to reject EA bid.April 11, 2008 - EA's deadline for acceptance of its offer.
April 17th, 2008 - New date for Take-Two shareholder meeting.
April 29, 2008 - GTA IV
April 30, 2008 - Initial date on which Take-Two board would consider EA's bid.Full details here of the latest Take-Two statement.