Electronic Arts Audacious Bid to Buy Take-Two

[Nodz86]

Take-Two reject an offer from EA for a take over, but this doesn't mean that EA will give up. I hope they don't accept a future offer as I don't want GTA to become an EA franchise.

 

Electronic Arts today announced that it has proposed to acquire Take-Two in an all-cash deal valued at approximately $2.0 billion.

The news follows weeks of rumors that Take-Two would be the subject of an acquisition bid, with Viacom touted as a possible suitor at $1.5 billion. EA has, it turns out, attempted to buy Take-Two for $25 a share, and, after being rebuffed, has upped the ante by a buck. But the firm has warned shareholders that they won't get a better price.

 

EA's proposal of $26 per share in cash represents a premium of 64 percent over Take-Two's closing stock price prior to the company's bid.

 

EA Chief Executive Officer John Riccitiello said "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."

 

He urged Take-Two shareholders to accept the bid, "There can be no certainty that in the future EA or any other buyer would pay the same high premium we are offering today."

 

EA had warned Take-Two's bosses that if they refused to engage in negotiations, the company would go public with its bid. Today, EA made good on that threat.

 

Take-Two's assets include Grand Theft Auto 4, which ought to be the biggest game of 2008. EA says it wants to get the deal done before the game's release in order to avoid disruption.

 

 

The full text of EA's letter to Take-Two follows:

 

February 19, 2008

 

Mr. Strauss Zelnick

Executive Chairman of the Board of Directors

Take-Two Interactive Software, Inc.

622 Broadway

New York, NY 10012

 

Dear Strauss:

 

Thank you for your letter of February 15, 2008. While I appreciate its courteous tone and value our ongoing dialogue, I am disappointed that you have rejected Electronic Arts Inc.'s ("EA's") $25 per share cash offer to acquire Take-Two Interactive Software, Inc. ("Take-Two") and declined to engage in the friendly negotiations we proposed. We continue to believe that an acquisition of Take-Two by EA is in the best interests of your shareholders, employees and other constituents, and we remain interested in acquiring Take-Two. So, to further demonstrate our seriousness and encourage you to move forward now, I am writing to increase EA's offer to acquire all of the outstanding shares of Take-Two to $26 per share in cash. This offer is subject to Take-Two agreeing by February 22, 2008 to commence negotiation of a definitive merger agreement and to permit EA to commence a limited due diligence review of Take-Two.

 

Our revised all-cash offer represents a 64% premium over Take-Two's most recent closing price and a 63% premium over Take-Two's 30-day trailing average price (based on prices as of market close on Friday, February 15th). We believe our offer represents a unique and compelling opportunity for Take-Two shareholders to maximize the value of their investment in the company, with materially lower risk than if Take-Two proceeds on a stand-alone basis.

 

We also believe that the transaction we are proposing represents a uniquely attractive opportunity for Take-Two's creative teams and key employees. EA is a diversified leader with well-established franchises and proven intellectual properties, global reach, and significant financial resources. I know we both agree that Take-Two's talented creative teams deserve a permanent home within a stable and growing publisher that provides these teams an environment to do what they do best - create great games. EA is organized in a four-label model that provides our creative teams the autonomy they need to fully realize their creative ambitions, while also providing a stable and supportive corporate and publishing infrastructure which allows them to best address the global marketplace. We have the resources to make the significant investments in technology and infrastructure needed for the most creative and innovative games in the industry. In short, a combination with EA would provide Take-Two's studios and employees a combination of the right resources for investment and global reach, and the right environment to do their best work.

 

We believe that Take-Two's shareholders would not be well-served by any further delay in negotiating and completing the proposed merger. While the videogame industry remains an attractive, high-growth business, the challenges and risks in the business are escalating, and the need for scale is becoming more pronounced. Despite steps taken since March 2007, Take-Two remains dependent on a limited number of titles, and has limited capital resources. In addition, Take-Two faces ongoing financial, legal and operating issues and a very intense competitive environment. Given these factors, we believe it will be increasingly difficult for Take-Two to create sustainable shareholder value and that Take-Two remains exposed to considerable risk of value loss.

 

We also believe that any delay in this proposed transaction works against the interest of Take-Two's shareholders, because:

 

-- There can be no certainty that in the future EA or any other buyer would pay the same high premium we are offering today. We place significant value on the ability to close the transaction relatively quickly so that EA's strong publishing and distribution network, including our global packaged goods, online and wireless publishing organizations, can positively impact the catalogue sales of GTA IV and also the launch and sale of titles released later this year. We want to work with you and your team to complete the transaction in time to begin realizing its significant marketplace benefits in advance of this year's holiday selling season.

 

-- We believe Take-Two's current share price already reflects investor expectations for a strong release of GTA IV as well as the longer-term issues that Take-Two faces. Once GTA IV ships, Take-Two will again be dependent on less-popular titles and face increasing challenges to compete with larger and better-capitalized competitors.

 

-- With GTA IV shipping on April 29, development on this important title must now be essentially complete. We believe now is the right time to complete a transaction with minimal disruption for Take-Two.

 

We also believe the transaction we are proposing will create value for EA's shareholders. In addition to the top-line benefits noted above, we can achieve bottom-line benefits by combining Take-Two's and EA's corporate and publishing infrastructures and by optimally supporting Take-Two's creative teams and intellectual properties in EA's decentralized label structure.

 

Considerable thought, time and resources have been put forth in developing this offer, and our Board of Directors unanimously supports it. Our offer is not conditioned on any financing requirement. It is subject to the satisfactory completion of a due diligence review of Take-Two, the negotiation and execution of mutually acceptable definitive transaction agreements, and the satisfaction of customary conditions to be set forth in such agreements. We are prepared to move forward immediately with formal due diligence and the negotiation and execution of a definitive merger agreement and believe that with adequate access to the necessary information and people, we can complete both in approximately two weeks. We believe that our due diligence review can be completed with minimal disruption, requiring only limited access to a small number of senior executives of Take-Two and its legal, accounting and financial advisors. We also have prepared a draft merger agreement that we can forward to you immediately.

 

Our strong preference is to conduct a private negotiation. If you are unwilling to proceed on that basis, however, we may pursue other means, including the public disclosure of this letter, to bring our offer and the compelling value it represents to the attention of Take-Two's shareholders.

 

I am available to meet and discuss any and all aspects of this proposal with you and your Board. Again, we believe this proposal represents a unique opportunity to maximize value for Take-Two's shareholders, and that the combined enterprise would be extraordinarily well positioned to build value for our respective customers, employees, developers and other business partners. We hope that you and your Board share our enthusiasm, and we look forward to hearing back from you by February 22.

 

 

Info from:

http://www.next-gen.biz/index.php?option=com_content&task=view&id=9285&Itemid=2

[Who]

EA cannot buy Take 2. it would kill the whole quality i associate with the publisher.

 

GTA would either have a difficulty curve resembling a ruler. (lying down, at 0% difficulty, naturally) would have all the cars removed so as not to compete against the NFS series, or most likely. would suck. it would be sequel and remake mania. i can pretty much guarentee that GTA4's first expansion will basically be vice city but slightly different layout, and more flashy graphics.

 

bioshock 2 would be spinoff galore, i can just see pimp my big daddy now.

[ShadowGT]

The Grand theft auto franchise will be ruined if EA bought Take two out. Like come on EA have already gradually slaughtered the NFS series (their last good game was most wanted) & i could seriously see them royally screwing up GTA 5 (or GTA:Vice city 2 etc). EA should just stick t what they do best! Releasing the same sports games every year with a new year at the end of the name!

[Nodz86]

Lwsbrck, am I right in saying that apart from GTA 2 and GTA London that all GTA's have been based in LC, VC or SA. There where 2D in the original then went 3D in the GTA III series (III, VC, SA, LCS and VCS) and now GTA IV goes back to LC. I wouldn't be suprised that with GTA IV sequal will be either VC or SA again if take two didn't sell to EA.

 

But I understand what you mean about EA would ruin the series by other things it would do to it.

[Eudemon]

Haha trying to buy them before GTA4 is out yet again! EA are the scum of the industry, they are nothing but crap rehashing non-creatives. Their good stuff is not from them but from the companies they have bought. There should be a law to stop this as essentially they are just trying to create a monopoly.

 

Take2 told them to come back after GTA4 had been released and I really do hope that they don't sell out or if they do that the team at Rockstar North jump ship and set up their own development studio leaving EA to create a new GTA from scratch and we all know noone does the humour like the Scots at small Leith based Rockstar North. :D