Take-Two rejects EA’s buyout offer
Take-Two Interactive Software Inc. played hard to get Wednesday, advising its shareholders to reject a $2-billion buyout bid from rival Electronic Arts Inc. and adopting measures to discourage a hostile takeover bid.
The New York-based video game publisher, believing it can attract a better offer, said EA’s cash bid of $26 a share undervalues Take-Two and is timed to take advantage of the April 29 launch of “Grand Theft Auto IV,” a highly anticipated video game whose release executives believe will help elevate the company’s share price. Its stock gained 9 cents Wednesday to close at $25.91.
Take-Two’s board also adopted a “poison pill” Monday to block EA’s move. The measure temporarily awards 1,000 votes for each share currently owned. Those extra votes, however, would not transfer to a new owner such as EA, giving incumbent owners disproportionate voting power.
Take-Two Chairman Strauss Zelnick said in an interview that the move, which expires in 180 days, is meant to “thwart abusive tactics to buy the company too cheaply.”
The measure is a risky route for Take-Two because regulators have tended to frown on efforts to alter shareholder voting power.
“These kinds of attempts to rearrange voting rights are highly vulnerable to legal challenges,” said John Coffee, a Columbia Law School professor.
EA called the board’s stance “regrettable.”
“By advising its stockholders to reject the offer, Take-Two’s Board is exposing them to further delays which may reduce the value and the certainty of a potential transaction,” the Redwood City company said.
EA declined to go beyond its statement. In earlier interviews, company spokesman Jeff Brown said, “We’re willing to step away if this deal ends up not making sense for our shareholders. We don’t need this to happen in order to complete our long-term strategic goals.”
Take-Two said it has gotten “indications of interest” from companies other than EA, but “no substantive discussions . . . have yet occurred,” the company said in a statement filed Wednesday with the Securities and Exchange Commission.
“The absence of other offers in the interim suggests to us that EA values Take-Two more highly than any other interested party,” wrote Michael Pachter, an analyst at Wedbush Morgan Securities.
Some analysts say Take-Two is posturing to extract a higher price from EA.
“We think EA will find a way to get this done, and, ultimately, this will end in a higher bid,” said Brent Thill, director of software research for Citi Investment Research. “EA has already shown a willingness to go higher. They started at $25 a share in February, and they went to $26. We certainly think it has room to go a few dollars higher.”
EA ended 2007 with $3.4 billion in cash and short-term investments. Its shares fell 72 cents to $49.46 on Wednesday.