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Tuesday, June 17, 2008

Take-Two yawns as EA extends takeover offer yet again

Once upon a time, industry titan EA wanted to buy its competitor Take-Two Interactive. Alas, it seems that the two just don't want to live together happily ever after. A new development in the on-going takeover war of EA and Take-Two has the latter rejecting the former's  latest bid extension, yet again.

Reuters reports that the offer of $25.75 per share is now good until July 18. At present, roughly 7.9 percent of the total controlling interest of Take-Two, or 6.14 million shares, has been tendered. This is a slight decrease from last month's figures, which ended up at 6.21 million shares tendered. Enthusiasm for the take-over among Take-Two shareholders may be waning.

Owen Mahoney, Senior Vice President of EA Corporate Development, offered congratulations to Rockstar for its success before reiterating the offer. "Our offer price remains unchanged at $25.74 per share, which is a substantial premium to where Take-Two's stock was trading prior to our offer," Mahoney said. "We congratulate Rockstar on the successful launch of GTA IV but believe our offer reflects a full and fair price based on the long-term value of Take-Two's entire operation."

Take-Two Chairman Strauss Zelnick responded with a similar sentiment to that uttered during all of the previous extensions, reminding EA that things haven't changed from last time, and taking a dig by referencing the vast number of hold-outs. "The latest extension of EA's unsolicited, highly conditional tender offer does not alter the fact that their proposal still significantly undervalues Take-Two, a fact that is reflected in the overwhelming number of stockholders who still have not tendered their shares."

Last month, EA extended its offer to purchase the remaining shares to give it control of Take-Two. Refusing the offer, CEO Zelnick cited the massive success of Grand Theft Auto IV and future plans for a Bioshock movie, as well as sequels to the game and more.

Take-Two's response continues a string of refusals from the majority of shareholders dating back as far as February of this year. While prior to the release of Grand Theft Auto IV Take-Two looked as though it might fold, the company's shareholders weathered the storm through to April and have been riding high on the wave of GTAIV's success. EA has continued to make stubborn advances without upping the offer, but Take-Two shareholders seem unwilling to budge at this point and the smaller game developer continues to advise shareholders not to tender their shares.

Earlier this month, EA had made a deal with the FTC to hold off on purchasing the company outright as the FTC reviewed the deal worth approximately $2 billion. That review process continues now, following the extension, and there are still many conditions, including regulatory approval, that will need to be satisfied before any deal goes through.

Given EA's track record, it's likely that the company will once again extend its bid in July in the hopes that shareholders will grow tired of waiting for more and finally sell their shares. In the mean time, Take-Two continues to explore different strategies behind the scenes.

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