Infogrames Entertainment To Acquire Controlling Stake In GT Interactive Software To Create One Of The Foremost Global Interactive Entertainment Companies

Infogrames today announced it has reached an agreement to acquire control of GT Interactive.

Posted by Staff
LYON, FRANCE, NEW YORK, NY & SAN JOSE, CA, November 15, 1999

Infogrames Entertainment S.A., an established leading developer, publisher and distributor of interactive entertainment, today announced it has reached an agreement to acquire control of GT Interactive Software (GTIS), a US-based company for a total investment of $135 million. This development effectively transforms the landscape of the global video games industry. As a result of this transaction, Infogrames will rank as one of the top interactive entertainment companies worldwide.

This transaction is intended to benefit the shareholders of both companies. As a result of this transaction, GTIS will have enhanced financial, distribution and managerial resources and will remain listed on NASDAQ. In GTIS, Infogrames acquires an interest in seven award-winning internal development studios, among which are Humongous Entertainment, Cavedog, Single Trac, Entertainment, WizardWorks Legend and Reflections.

Through this transaction, Infogrames will be able to expand its impressive product offerings of such franchises as Mission Impossible, Test Drive and Looney Tunes to include GTIS best-sellers like Driver, Deer Hunter, Blues Clues and Abe?s Odyssey. This transaction continues Infogrames? global expansion by firmly establishing it in the North American interactive entertainment market, estimated to reach $7 billion in sales next year.


Infogrames Agreement with GTIS

Infogrames will purchase 33.4 million GTIS common shares from the founding Cayre family for $25 million, implying an average price of 75 cents per share. The Cayre family has also committed to provide Infogrames with a proxy for the 1.3 million shares that will still be owned by the Cayre family upon closing of the transaction.
Infogrames will purchase 28.6 million newly issued shares for $50 million. Infogrames will also purchase a convertible note from GTIS for approximately $60.5 million, which will be convertible into GTIS common shares at $1.85 per share for a total of 32.7 million shares. As part of the consideration for the $60.5 million convertible note, Infogrames will acquire and surrender to GTIS the $10.5 million junior debt owned by members of the Cayre family.
GTIS will issue a new $50 million convertible note to funds managed by General Atlantic Partners, in exchange for $30 million in preferred stock and a $20 million subordinated note held by General Atlantic Partners. The note will be convertible into GTIS common shares at $4.00 per share. In addition, General Atlantic Partners will transfer to Infogrames warrants for the purchase of 4,500,000 GTIS common shares.

Following this transaction, Infogrames will hold approximately 70% of the outstanding common stock of GTIS, assuming conversion of Infogrames? convertible notes. Infogrames will also have the right to appoint a new board of directors. As part of the transaction, GTIS? bank syndicate has agreed to amend its credit agreement with GTIS.

Infogrames founder and Chairman Bruno Bonnell said, "This transaction demonstrates our commitment to making Infogrames the No. 1 player in this market. In the past two years, we have demonstrated our ability to purchase and turn around such companies as Ocean in the UK and Philips Media?s European assets. Similarly, I am confident that Infogrames can drive GTIS back to profitability."

GTIS Chairman & Chief Executive Officer Tom Heymann noted: "Joining Infogrames, a proven world leader, will add value for our shareholders. It is the right move for our company and it opens a new chapter for GT Interactive Software. There are great synergies between our catalogs, which feature such best-selling titles as Driver and Infogrames? Mission Impossible and Test Drive franchises. Also, I would like to emphasize the key role played by the Cayre family in facilitating this transaction; their acceptance of a price for their shares that is significantly below the price at which Infogrames is investing in the company will benefit both shareholders and employees by allowing them to participate in a new stage of GTIS?s development. "

Effective immediately, Bruno Bonnell and Thomas Schmider, Infogrames? Chief Operating Officer, will actively participate in refocusing GTIS operations with Tom Heymann. In a related development, Infogrames announced the appointment of Pierre Sissman to the newly created position of president of Infogrames? European operations, thereby permitting Messrs. Bonnell and Schmider to devote proportionally more of their time to North American operations. Mr. Sissman joins Infogrames after an 11-year career with various Walt Disney Company units in Europe, most recently as Executive Vice President of The Walt Disney Company (Europe).

Mr. Bonnell added: "I am really excited about the opportunity we have to re-energize this company, which has so much potential. The combination of our companies? product offerings, together with a restructured distribution network, should greatly benefit both sets of shareholders."

Mr. Heymann noted: "Infogrames? investment will enable us to capitalize more effectively upon our great mix of products, which include Driver and Deer Hunter, two of the best-selling titles in the world over the past four months."

This transaction is expected to be slightly accretive to Infogrames? earnings before goodwill amortization for the fiscal year ending June 30, 2000. Infogrames expects that with the benefit of a full year of combined operations, and improved efficiencies implemented by the new management, the earnings of Infogrames will be enhanced before and after goodwill amortization in the year ending June 30, 2001.

Both companies intend to explore new opportunities afforded by this association, including in the areas of distribution and marketing.

Since its founding in 1983, Infogrames has attained critical mass through a carefully planned strategy combining internal growth and acquisitions in all the key global interactive software games markets. In June 1999 the company acquired privately held publisher Accolade in San Jose, Calif, for $60 million and merged its operations with Infogrames? existing distribution network to create Infogrames North America.

Additional details regarding today?s deal will be announced in the coming weeks. Pursuant to the securities purchase agreement, the company will grant Infogrames registration rights covering the shares of GT Interactive common stock to be issued to Infogrames.

Lazard Frères & Co. llc acted as financial advisor to Infogrames while Bear Stearns & Co., Inc. represented the interests of GTIS. Pillsbury Madison & Sutro LLP and Kramer Levin Naftalis & Frankel LLP acted as legal advisors to Infogrames and GTIS, respectively.


Infogrames Entertainment

Headquartered in Lyon, France, Infogrames Entertainment (Paris Bourse: SICOVAM 5257; Bloomberg: IFG) is a leading company in the development, design, publishing and distribution of interactive entertainment software for Nintendo, Sega and Sony consoles and PCs. The company was founded in 1983 by its Chairman and CEO, Bruno Bonnell. The company ranks as one of the top interactive entertainment software companies worldwide.

Infogrames develops and distributes award-winning PC and video games for all the top game consoles, including Sega® DreamcastÔ , NintendoÒ 64, Nintendo Game Boy Color, PlayStation® , and personal computer platforms. Its catalog includes world famous licenses such as Warner Bros. "Looney Tunes" and "Mission: Impossible" from Paramount. Original titles include "V-Rally", which has sold over 4.7 million units across nearly 60 countries. Infogrames owns one of the largest distribution network in the industry in Europe and Australia. For more information on Infogrames latest news developments, visit: www.infogrames.com


GT Interactive Software

Headquartered in New York, GT Interactive Software Corp. (Nasdaq: GTIS) is a leading global developer, publisher and distributor of interactive consumer software. The company maintains four divisions: Children's Publishing, Leisure Publishing, Frontline Publishing and Distribution. The company has publishing operations throughout the world with offices in the US, Canada, UK, Germany, France, Holland and Australia. GT Interactive also has seven internal development studios: Humongous Entertainment, Cavedog Entertainment, SingleTrac, WizardWorks, Oddworld, Legend Entertainment and Reflections. GT Interactive's ecommerce system provides secure online transactions through each of the studios' Web sites and www.gtstore.com. GT Interactive can be found on the Internet at www.gtinteractive.com.


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Safe Harbor Statement

All statements in this press release concerning future events are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this press release include: statements concerning the enhancement of GTIS?s financial, distribution and managerial resources as a result of the transaction; estimates of the future size of the North American interactive entertainment market; all statements regarding GTIS?s future profitability and the contribution of the transaction and Infogrames to any such GTIS profitability; all statements concerning whether the transaction and GTIS?s joining with Infogrames will add value to GTIS shareholders or will benefit those shareholders; all statements concerning whether the transaction will benefit Infogrames shareholders; statements relating to GTIS?s potential and whether the transaction will open a new chapter for GTIS or enable it to capitalize on its mix of products; all statements concerning the anticipated impact of the transaction on Infogrames? earnings, including all such statements relating to the impact of the transaction on those earnings for the fiscal year ending June 30, 2000 and the fiscal year ending June 30, 2001; statements concerning any intention to explore opportunities in the North American market in the areas of distribution and marketing; and all statements concerning or relating to any future expansion by Infogrames.
Such statements involve risks and uncertainties which may cause results to differ materially from those set out in the statements, and there can be no assurance that such results will be achieved or that the plans, intentions or expectations of Infogrames and GTIS will be realized. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: world-wide business and industry conditions; adoption of new hardware systems; product delays; software development requirements and their impact on product launches; relations with customers; the risk that the additional capital provided by this transaction may not be sufficient to sustain and develop GTIS?s operations (including the possibility that GTIS will experience negative net-cash flow from operations); difficulties in integrating GTIS?s operation with Infogrames; risks of actual or potential problems or difficulties in GTIS?s operations that Infogrames may not have discovered during its review of GTIS prior to agreeing to the transaction; the risk that GTIS may not be able to meet its commitment under its various agreements with banks and the consequent risk of a default on one or more of such agreements; possible difficulties caused by the burden on Infogrames? management resources that will be imposed by this additional acquisition; and the risk that changes and innovations in GTIS management, strategy or structure following the change of control could be costly, disruptive to operations and unsuccessful in achieving improved performance.
The important factors that could cause actual results to differ materially from those in the forward-looking statements also include other risks and factors detailed in GTIS?s filings with the Securities and Exchange Commission including but not limited to the factors described on pages 9-15 of the company?s annual report on form 10-K for the fiscal year ended March 31, 1999. Such filings have discussed among other things: the difficulties GTIS could encounter if it is unable to introduce new products on a timely basis; possible inability to develop, market and publish new products if GTIS is unable to secure or maintain relationships with independent software developers; competition that GTIS faces for the services of independent software developers; the risk that independent developers may publish their own products instead of using GTIS to do so; possible inability to recover through sales advance royalty payments made to developers; the risk that GTIS may not anticipate or adapt to rapidly changing technology; possible cost increases resulting from control that certain licensors exercise over GTIS?s manufacture of products; all the economical and political risks of doing business abroad; the risk the distribution business may decline as competition increases and internet technology improves; possible difficulties in protecting intellectual property rights; risks to distribution revenues from the possibility that competitor interactive game manufacturers may stop distributing product through GTIS; the uncertainty and possible failure of successfully implementing an internet strategy; risks created by litigation in which GTIS is currently involved; the possibility that products, systems and sales may be subject to year 2000 problems; the risks created by the increasingly hit-driven nature of the interactive game market, and the possibility that GTIS may not be the company manufacturing and distributing the hits; logistical problems associated with distribution of products (including outsourcing distribution); and the risk that GTIS may experience higher than anticipated product returns and may need to provide greater than anticipated price protection.


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Infogrames contacts:

Mark D. Harrop
MS&L
(212) 213-7175
Mharrop@mslpr.com

Erica Krishnamurthy
Infograme
s North America
(408) 985-1700 ext 256
ekrishnamurthy@us.infogrames.com


GTIS Contact:

Robert Zeitlinger
Makovsky & Co.
(212) 508-9617
rzeitlinger@makovsky.com