Analyst: EA Will Have To Raise Bid To Buy Take-Two

Author: by Staff

Analyst Mike Hickey of Janco Partners has predicted, ahead of today's Take-Two shareholder meeting, that Electronic Arts lacks sufficient shareholder support to force through its $26-per-share bid for the company, suggesting a $30 bid may be necessary. In the course of the note, Hickey also noted that he believes Grand Theft Auto IV's launch will dampen the Iron Man movie's theatrical release. In the analysis sent to investors earlier today, Hickey explains: "We continue to believe EA wants to buy Take-Two but will likely have to raise their tender to $30 per share if they expect to close the deal. We maintain our view EA’s bid will prove insufficient after talking with TTWO shareholders and our approximation that at least 35% of the TTWO’s shareholder base consists of arbs. We do not believe EA has accumulated more then 25% of the Company’s shares in their current tender, which should provide them minimal leverage in pressuring the Company’s board in favor of their $26 bid. It’s difficult for us to determine EA’s willingness to increase their bid to complete the acquisition, but the accretive nature of the deal seems obvious and the incremental cost of a higher bid seems minimal compared to the longer term benefits. We believe Zelnick Media’s compensation plan will be approved today and that management continues to aggressively pursue the best interest of shareholders." In addition, Hickey, who has recently returned from a meeting with Take-Two, commented on the Grand Theft Auto IV launch in relation to Marvel's movie release of Iron Man, since he also covers Marvel's publicly traded shares. He noted: "We remain optimistic over the initial market success of GTA IVHalo 3’s massive success in CY07. We believe the game’s release could dampen the theatrical success of Marvel’s Iron Man release anticipated on May 2nd. We believe Marvel’s shares have appreciated in-line with the movie’s buzz and will likely offer limited upside post release. Importantly, there is limited buzz for Marvel’s Hulk theatrical release expected in June, providing few post Iron Man share catalysts, in our view. Marvel’s shares have a history of rising into major theatrical releases like Spiderman and then selling off post release, we expect nothing different this time from Marvel shares."