25 February 2008
Ferry

EA offers $2 billion to buy Take-Two (Rockstar, 2K and Firaxis). Take-Two declines

Electronic Arts announced that it has proposed to acquire Take-Two Interactive Software in an all-cash merger valued at approximately $2 billion. EA’s proposal of $26 per share in cash represents a premium of 64% over Take-Two’s closing stock price on February 15th.

EA’s proposal was contained in a letter sent on February 19th by EA Chief Executive Officer John Riccitiello to Strauss Zelnick, Executive Chairman of the Board of Directors of Take-Two. The Take-Two Board’s subsequent rejection of the EA proposal led to EA’s decision to release the letter and bring its proposal to the attention of all Take-Two shareholders, and indirectly you as well as everyone else in the public.

But why did Take-Two’s board decline EA’s proposal? Not enough money for them! To quote: “After careful evaluation, the Board has determined that EA’s proposal substantially undervalues Take-Two’s robust and enviable stable of game franchises, exceptional creative talent and strong consumer loyalty. We believe EA’s unsolicited offer is highly opportunistic and is attempting to take advantage of our upcoming release of Grand Theft Auto IV, one of the most valuable and durable franchises in the industry. Furthermore, the offer values the Company at a significant discount to its public peers and does not compensate Take-Two for its intrinsic value and the substantial synergies that the proposed combination would create.” Supposedly talks between the two companies will continue on April 30th.

Take-Two is the owner of the following companies and their game properties: Rockstar Games (Grand Theft Auto, Midnight Club, L.A. Noire & Manhunt), 2K Games (BioShock, The Elder Scrolls, Dungeon Siege & Borderlands), 2K Sports (NBA 2K, NHL 2K, All-Pro Football 2K & All-Pro Football 2K), Firaxis (Sid Meier’s Civilization, Pirates, Railroads! & Alpha Centauri).

EA’s Mr. Riccitiello said today: “Our all-cash proposal is a unique opportunity for Take-Two shareholders to realize immediate value at a substantial premium, while creating long-term value for EA shareholders. Take-Two’s game designers would also benefit from EA’s financial resources, stable, game-focused management team, and strong global publishing capabilities.”

The EA letter warned that further Take-Two delay in accepting EA’s proposal could prevent Take-Two’s shareholders and other constituents from realizing its benefits. “There can be no certainty that in the future EA or any other buyer would pay the same high premium we are offering today,” Mr. Riccitiello wrote. The letter added that timely completion of the proposed transaction would allow EA’s strong publishing and distribution network to positively impact the ongoing post-launch sales of GTA IV and support the new Take-Two titles scheduled for launch later in the year and during the holiday selling season.

As noted in EA’s February 19th letter, EA’s proposal is not conditioned on any financing requirement. It is, however, subject to certain customary conditions as set forth in the letter. EA’s $26 per share proposal is based on the current equity capitalization of Take-Two. Although EA indicated in the letter that its proposal was subject to negotiations commencing by Feb. 22nd, EA intends to keep its proposal open for the present to give Take-Two’s shareholders and Board of Directors further time to consider it.

Update: EA have confidently put up the following merger website to answer any questions investors and consumers might have: eatake2.com. In a strange turn of events they also registered eaubisoft.com which is offline, but for how long? *DUN DUN DUN DUN!*