Take-Two Interactive Rejects EA Bid

Take-Two Interactive dispatched a public press release to reject the offer EA announced today. Take-Two Interactive has Bear Stearns and Lehman Brothers as financial advisors and seems to believe that EA's offer is too low, and that it will benefit so much from the release of Grand Theft Auto IV that Take-Two Interactive wants to wait until after the release of that game to begin negotiations for a much higher price.

Take-Two Interactive clearly believes that it will gain a significant boost from the release of Grand Theft Auto IV on April 29, while Electronic Arts argues that benefit is already priced into Take-Two Interactive's stock. Take-Two Interactive offered to begin negotiations on April 30 (the day after GTA IV becomes available) assuming that EA is prepared to talk about a higher price.

Take-Two Interactive claims that EA's offer is not in the best interest of its shareholders, but we here at FI expect that shareholder lawsuits will very shortly disagree with that assessment, pressuring Take-Two to accept EA's offer. EA is almost certainly approaching this acquisition as an opportunity to strengthen its brand and offerings at a premium that is still attractive to EA's shareholders, and there is no reason to expect this offer will still be on the table after the release of GTA IV. If GTA IV is more successful than expected, it is unlikely any company will want to pay the premium Take-Two will demand. If GTA IV is less successful than expected (even if it is tremendously successful), companies will be less likely to offer a high premium to bail Take-Two Interactive out of its problems.