Random acts of violence have never been so valuable. As we draw closer to the impending April 29 release date for Grand Theft Auto IV, Electronic Arts has officially made a play to acquire Take-Two Interactive. The proposed all-cash merger represents a 63% premium over Take-Two stock’s 30-day trailing average for the period ending February 15, the last trading day prior to EA’s delivery of its revised bid. Take-Two, the extremely popular studio behind Rockstar Games titles and the 2K Sports franchise, seemingly wants to hear nothing of it. Electronic Arts CEO John Riccitiello indicated a “strong preference” to keep negotiation details private in a letter to Strauss Zelnick, Take-Two Chairman of the Board. After Take-Two’s Board initially rejected the Electronic Arts proposal publicly however, EA decided to make its intentions public in order to make shareholders aware of their side situation. Interestingly, this morning’s press release has already sent Take-Two stock soaring; up over 50% at the time this article was written. So much for that 63% premium. Take-Two’s initial public response in a press release yesterday stated that the proposed offer was grossly inadequate.
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.
If Take-Two does indeed maintain their position, hey, at least their stock got a nice kick in the pants. If Take-Two has a change of heart and opens a line of discussion, expect that $2 billion figure to increase substantially if EA wants to get serious with their intentions.
Read (EA: We want to buy you!)
Read (Take-Two: No.)