Electronic Arts announced today, in a rare Sunday story, that they were seeking to acquire struggling Take-Two, the parent company of 2K Games, 2K Sports, 2K Play and Rockstar Games. Titles published under Take-Two companies include BioShock, Elder Scrolls IV: Oblivion and Grand Theft Auto IV. Rockstar is famous for its GTA franchise.
EA proposed an all-cash merger valued at approximately $2.0 billion, or $26 per share. This represents a premium of 64 percent over Take-Two’s closing price on February 15th, the last trading day before EA sent its revised proposal to Take-Two. EA’s proposal was contained in a letter sent on February 19th by EA Chief Executive Officer John Riccitiello to Strauss Zelnick, Executive Chairman of the Board of Directors of Take-Two. The Take-Two Board of Directors immediately rejected the bid.
Mr. Riccitiello, CEO of EA, said today, “Our all-cash proposal is a unique opportunity for Take-Two shareholders to realize immediate value at a substantial premium, while creating long-term value for EA shareholders. Take-Two’s game designers would also benefit from EA’s financial resources, stable, game-focused management team, and strong global publishing capabilities.”
Strauss Zelnick, Executive Chairman of the Board of Take-Two commented, “Electronic Arts’ proposal provides insufficient value to our shareholders and comes at absolutely the wrong time given the crucial initiatives underway at the Company. Thanks to the extraordinary efforts of our creative and business teams, Take-Two has made enormous strides in the past 10 months toward our common goal of being the most creative, innovative and efficient company in our industry.”
Mr. Zelnick continued, “In addition to undervaluing key elements of our business, EA’s proposal fails to recognize the value we are building through our ongoing turnaround efforts, which will further revitalize Take-Two. While we have made substantial progress already, the turnaround of our business which we initiated in June is not yet complete, and we believe its benefits have not been recognized in either our current stock price or in the value of EA’s proposal.”
Despite the rejection of Take-Two’s Board of Directors, EA is unlikely to go down without a fight. In taking its efforts public, EA is counting on pressure from shareholders to cause Take-Two’s leadership to accept the merger. EA has launched the website http://eatake2.com/ with an open letter to Take-Two shareholders. The deal would mark the second major merger in recent months with Activision and Vivendi (Blizzard) announcing in December their intention to merge, forming the largest publisher in the industry.
