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Electronic Arts Won't Extend Take-Two Deadline
Barbara Ortutay / Assocaited Press
August 18, 2008
NEW YORK – Video game publisher Electronic Arts Inc. may be retracting its hostile bid for smaller rival Take-Two Interactive Software Inc., but a deal – and a friendly one at that – is more likely than ever.
Take-Two, best known for the popular “Grand Theft Auto” video game series, confirmed Monday it expects to sign a confidentiality agreement with EA to begin formal discussions about “strategic alternatives.”
EA had said earlier it wouldn’t extend the Monday night deadline for its $2 billion tender offer to buy Take-Two. The companies have been unable to agree on a price for the past six months.
Now, EA is saying that if it does buy Take-Two, it no longer believes it can combine the company in time for the holidays, when video game companies make most of their money. Because of this, EA said it needs to review assumptions made to support its offer price of $25.74 per share.
“They are both posturing,” said Wedbush Morgan analyst Michael Pachter. “EA is saying `we want to pay less,’ Take-Two is saying they want more. The important thing is that they are talking.”
EA already has extended its deadline for the offer five times, mostly to let regulators continue their antitrust review. The company said it would let the offer expire at 11:59 p.m. EDT Monday, and added it “remains confident that antitrust issues will not prevent or delay a transaction.” The Federal Trade Commission is scheduled to complete its review by Thursday.
On Monday, EA said it will entertain a financial presentation by Take-Two under confidentiality agreements. Take-Two’s management said it plans to present EA with 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 not just for the “Grand Theft Auto” franchise, the company’s main source of revenue, but also for its sports business and critically acclaimed titles such as “BioShock,” which is being made into a movie.
On Friday, EA Chief Executive John Riccitiello called Strauss Zelnick, chairman of Take-Two’s board, to discuss the offer. Following further discussions over the weekend, 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 a separate statement, Zelnick said his company’s board remains “unwavering in its belief” that EA’s offer price was too low.
Shares of New York-based Take-Two slid 83 cents, or 3.3 percent, to $24.01. This is still well above $17.36. the stock’s closing price on Feb. 22, the last trading day before EA went public with the offer. This could signal that investors are confident a deal will go through, but the question is at what price, and when.
Pachter, for one, 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.
Shares of Redwood City, Calif.-based EA slipped 18 cents to $48.06.
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AP Technology Writer Anick Jesdanun contributed to this story.
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