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EA proposes a two billion dollar buyout of Take Two

Romier S

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Reported on Yahoo..




REDWOOD CITY, Calif.--(BUSINESS WIRE)--Electronic Arts Inc. (“EA”) (NASDAQ: ERTS - News) today announced that it has proposed to acquire Take-Two Interactive Software, Inc. (“Take-Two”) (NASDAQ: TTWO - News) in an all-cash merger valued at approximately $2.0 billion.


EA’s proposal of $26 per share in cash represents a premium of 64 percent over Take-Two’s closing stock price on Feb. 15th, the last trading day before EA sent its revised proposal to Take-Two, and a 63 percent premium over Take-Two’s 30-day trailing average price over the thirty trading days ending on that date.


EA’s proposal was contained in a letter sent on Feb. 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’s subsequent rejection of the EA proposal led to EA’s decision to release the letter and bring its proposal to the attention of all Take-Two shareholders.


Mr. Riccitiello 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.”


The EA letter warned that further Take-Two delay in accepting EA’s proposal could prevent Take-Two’s shareholders and other constituents from realizing its benefits. “There can be no certainty that in the future EA or any other buyer would pay the same high premium we are offering today,” Mr. Riccitiello wrote. The letter added that timely completion of the proposed transaction would allow EA’s strong publishing and distribution network to positively impact the ongoing post-launch sales of GTA IV and support the new Take-Two titles scheduled for launch later in the year and during the holiday selling season.


As noted in EA’s Feb. 19th letter, EA’s proposal is not conditioned on any financing requirement. It is, however, subject to certain customary conditions as set forth in the letter. EA’s $26 per share proposal is based on the current equity capitalization of Take-Two. Although EA indicated in the letter that its proposal was subject to negotiations commencing by Feb. 22nd, EA intends to keep its proposal open for the present to give Take-Two’s shareholders and Board of Directors further time to consider it.

Bioshock, Rockstar, The 2K sports lineup. Yikes. It's noted that the proposal was rejected but negotiations are still a possibility here.

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EA have even created a website devoted to the buyout with an open letter from John Riccitiello.




I’m pleased to announce that EA has made a proposal to acquire Take-Two. We’ve issued a press release that explains why the deal is attractive for the shareholders of both Take-Two and EA. Now I want to share some perspective on why it would be good for the people who make Take-Two’s games and, just as important, the people who play them.


In a recent presentation, I told a group of developers that our industry is facing big challenges. Development costs are rising dramatically and games that aren’t big hits struggle to reach profitability. Most independent studios don’t have much margin for error. The result has been consolidation – large publishers are merging and independent developers are more amenable to being acquired. Unfortunately, our industry has a spotty record on integrating creative teams. We’ve all heard the stories about teams that got mismanaged in a merger – I know I’ve got a few.


I like to think that we learn from our experience. When I came back to EA last year, we introduced a new organization model that respects creative cultures and gives developers more freedom. We call it the “Label” model because it treats each of EA’s four labels as a sovereign entity responsible for its own creative decisions and business results. We expect each team to operate on a profit plan and, in exchange, we provide investment, infrastructure and a lot of creative freedom.


Has it worked at EA? It’s too early to say for sure, but the initial feedback is encouraging. Many of the people at Digital Illusions in Stockholm, Criterion in the UK, Mythic in Virginia, and more recently BioWare and Pandemic will tell you that so far, the experience at EA has been good. If you know people who work for these studios, I’d encourage you to talk to them. Ask them about our Label organization model. It’s the model we hope to use with Take-Two.


Right now, Take-Two’s future is uncertain. Take-Two’s creative teams make fantastic games and the company has gotten some good interim support from a group of new corporate leaders. But Take-Two is facing a host of threats and – with or without combination with EA – we believe there is a strong likelihood that the company will be sold in the not-too-distant future.


We also believe that EA’s proposal to acquire Take-Two is a good one for the people that make the games or are involved in leading these creative teams. We’re offering stable management with an executive team that truly understands games. EA has a powerful publishing capability. We want to offer these and other advantages to Take-Two’s creative teams and provide them an environment that shields these teams from unnecessary interference and allows them to keep making great games.


For people who buy and play games, know that we too are fans of Take-Two and Rockstar products and feel we can provide their creative teams with the support they deserve to continue to bring you more of their great games in the future.


So, that’s it. We’ve made a proposal to buy Take-Two. Our preference is to make this a friendly transaction and I’m hopeful we can achieve that. We’ve sent this proposal in the genuine belief that combining EA and Take-Two would be good for the people who make games and good for the people who play them.


I sincerely hope we get a chance to prove it.


John Riccitiello

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Only good thing that could come out of this is MVP Baseball

There could be a great deal of good that come of this as Take Two has been in a precarious position for some time now. One smaller good that could possibly come of the deal is Ken Levine and 2K Boston working on the EA owned System Shocked 3 license (though word is Starbreeze is already on it).


The problem is not EA now, what happens when leadership down the road decides to change this "Label" model they are using now

EA's "Label" model is a whole lot of talk right now with very little to actually show for it. It's to new to assume much of anything about EA now or in the future. I'm glad EA is looking to allow thier studios creative freedom but we'll see if that's the case in the years to come or if they're just blowing smoke.

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Pretty soon all restaurants will be Taco Bell.




I don't think EA is yet big enough to be considered a monopoly. Big, but not that big.


I'm neither a huge fan nor a huge detractor of EA. They make some good things and they suck the life out of other things.


That said, Take Two owns Firaxis, so this affects be beloved Civilization. I'm waiting to see what happens.

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The more things change, the more they stay the same. Take Two's board changed dramatically last year in an attempt by major shareholders to 'right' the direction of the company after years of "financial shenanigans". Shame about this, if true:


"That’s right: Take-Two received a rich and serious offer from a substantial company. It didn’t disclose the offer, and hoped to keep it secret until at least after the annual meeting, when investors might have challenged the compensation package and attempts by the company to block the deal. Then, in a public filing, Take-Two in effect threatened EA not to make the offer public by giving ZelnickMedia a chance to enrich itself, at the expense of shareholders, by granting restricted stock that will vest immediately if EA made the deal public.


"Exercising my right as a columnist, who writes commentary, and who (by way of full disclosure) has been critical of Take-Two for at least five years: That’s beyond absurd. Makes you wonder which shareholders the company puts first."


Stern Agee analyst Arvind Bhatia said in a research note Monday, "We ... do not expect shareholders to approve Take Two's management’s recently (last week) proposed new, more lucrative compensation plan that includes new restricted stock with accelerated vesting in case of change of control.


"We are not sure how Take Two’s management was able to propose the new compensation plan without disclosing EA’s already pending acquisition proposal."

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