EA Makes 'Hostile' $2 Billion Tender Offer For Take-Two

Author: by Brandon Boyer, David Jenkins

Electronic Arts has officially announced that it has commenced a 'hostile' tender offer for all outstanding shares of Take-Two stock at $26 – the same price as its original formal offer last month. That initial unsolicited offer was rejected by Take-Two directors, claiming that it undervalued the company – despite representing a 50 percent premium over then current share prices. Take-Two subsequently refused to negotiate further, until after the release of subsidiary Rockstar Games’ Grand Theft Auto IV in April. Analysts are split on whether this 'hostile' takeover, so-called because it would bypass Take-Two’s company directors and go directly to shareholders, will be successful and whether the per share offer price will have to be increased. The Wall Street Journal quotes analyst Evan Wilson of Pacific Crest Securities as saying, “What the stock and the market are telling you is every day that goes by makes this deal less likely at $26”. Following yesterday's analysis predicting that EA's offer was only likely to be increased to $27 at most, Wedbush Morgan's Michael Pachter has released a note to investors again saying, "Although we think that EA preferred to complete a friendly deal, Take-Two management has consistently opposed the combination. Notwithstanding Take-Two's opposition, we think investors will jump at the offer." "Should Take-Two management choose to invite EA to the bargaining table," he continued, "we think that there is some potential for the offer to increase slightly, but in our view, no higher than $27. We are not prepared to handicap the likelihood of a friendly response by Take-Two management at this time, as both parties have been adamant about their positions. We believe that shareholders would be better served by a conciliatory gesture by management, especially given our belief that Take-Two management no longer has significant support from its shareholder base." Said EA CEO John Riccitiello in the latest statement, "This is a great opportunity for Take-Two shareholders. We believe Take-Two investors will see our tender offer as the best way to maximize the value of their investment in Take-Two. This tender offer provides a clear process to complete the proposed transaction. For EA shareholders, the combination would add additional intellectual properties to our already strong portfolio and welcome Take-Two's talented creative teams to the great development organization we've built at EA."