Electronic Arts: No Plans To Extend Take-Two Deadline
Popular video game company Electronic Arts Inc. is withdrawing its aggressive bid to buyout smaller rival Take-Two Interactive Software Inc., even so, a deal is more likely than ever.
On Monday, Take-Two confirmed that it plans to sign an agreement with EA to begin discussions about “strategic alternatives.”
EA had previously said it wouldn’t extend it’s $2 billion bid to buy Take-Two, maker of popular game “Grand Theft Auto,” beyond Monday night. The two companies have been in a stalemate over the buyout price for the past 6 months.
EA says it will not be able to combine the two companies before Christmas should the buyout happen. EA is now wanting to lower its offer of $25.74 per share because it will be missing the biggest money making time of the year.
“They are both posturing,” said Michael Pachter, analyst at Wedbush Morgan. “EA is saying ‘we want to pay less,’ Take-Two is saying they want more. The important thing is that they are talking.”
To allow regulators to continue their antitrust review, EA has extended its deadline for the offer on five occasions.
The company said it would let the offer expire at 11:59 p.m. EDT Monday. The company added it “remains confident that antitrust issues will not prevent or delay a transaction.” The Federal Trade Commission will complete its review by Thursday.
EA said it would entertain a financial presentation by Take-Two under confidentiality agreements.
The management of Take-Two wants to give EA its three-year product release schedule, financial projections and other nonpublic information meant to support its claims of what the company is worth.
EA wants to buy Take-Two for its lucrative “Grand Theft Auto” franchise, as well as its sports business and critically acclaimed titles such as “BioShock,” which is being made into a movie.
Take-Two’s sales for the most recent fiscal year totaled $982 million. EA, meanwhile, reaped sales of $3.67 billion in the year ended March 31.
EA Chief Executive John Riccitiello called Strauss Zelnick, chairman of Take-Two’s board, to discuss the offer last Friday. After further weekend discussions, EA agreed to hear Take-Two’s presentation.
In a letter made public Monday, Zelnick said the company “has made significant strides since EA first expressed interest” in Take-Two. In another statement, Zelnick said his company’s board remains “unwavering in its belief” that EA’s offer was too low.
Shares of New York-based Take-Two fell 63 cents, or 2.5 percent, to $24.21. The price is still well above $17.36, the stock’s closing price on Feb. 22, the last trading day before EA announced its offer of $25.74 per share. This could mean investors are confidant a deal will go through. However, the question remains at what cost, and what day?
Shares of Redwood City, Calif.-based EA fell 60 cents to $47.64.
Pachter said if the companies’ managements “are as smart as I think they are,” this price will be somewhere between $26 and $27, and an agreement could happen this week. However, if Take-Two decides to hold out for a higher price, like $30 or more, experts say EA will bid lower, at a price closer to $20. This, Pachter noted, is less likely, given the “dearth of other bidders.”
If a deal goes through, EA has said it would give Take-Two’s creative teams – many of which have worked under a succession of CEOs over the past few years – a “stable management” that understands video games.
Riccitiello took over at EA in April 2007 and has changed the software publisher into a “city-state model,” with four game divisions and distinct, independent development studios.
EA has still been under pressure from investors to improve its creativity and rely less on sequels of existing hits. Experts say those weaknesses are something the Take-Two acquisition could make stronger.
Zelnick took over as chairman of Take-Two in March 2007, after shareholders got rid of the company’s top executives and board members. They cited poor results, accounting troubles and controversy surrounding violent and sexual content in games.
Several former executives, including ex-Chairman and CEO Ryan A. Brant, pleaded guilty in 2007 to falsifying business records after a probe into backdated stock options.
Image Courtesy Eliot Lash Wikipedia
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