Electronic Arts Walks Away from Take-Two

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Electronic ArtsElectronic Arts had a hostile takeover offer for Take-Two Interactive for months, which it recently ended to enter private discussions with Take-Two. Due to confidentiality requirements, there has been radio silence from the two companies, but Electronic Arts issued a statement today that, "while EA continues to have a high regard for Take-Two's creative teams and products, after careful consideration, including a management presentation and review of other due diligence materials provided by Take-Two Interactive Software Inc., EA has decided not to make a proposal to acquire Take-Two and has terminated discussions with Take-Two."

There you have it. Under the current conditions, EA will not acquire Take-Two. In other words, the price that Take-Two's management and shareholders want for the company is too high for EA to feel it prudent at this time.

Take-Two Interactive responded by saying that the company remains "actively engaged in discussions with other parties in the context of our formal process to consider strategic alternatives."

FI's perspective is that a lot of investors and banking analysts thought that EA was going to up its offer. Take-Two maintained the offer undervalued the company. FI doesn't think so, and EA is clearly willing to walk away from the deal. We also expect that this is going to cause a long-term gradual decline in Take-Two's stock. Many investors have taken issue with the way ZelnickMedia has been extracting value from Take-Two Interactive, and no game that will be released in the near future will have the same financial impact as Grand Theft Auto IV. So it seems like Take-Two's management tried to bluff the price up, EA called Take-Two's bluff, and now Take-Two Interactive will have to rely on their own management unless another company is willing to step into daylight and let Zelnick and the other managers off the hook with a fat buyout.

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This page contains a single entry by Editor published on September 14, 2008 2:21 PM.

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