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Mergers For Us, Mergers For Them

| 4 Sep 2008 15:39
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Hearts are being broken in the videogame business world today: Tecmo has reportedly rejected Square Enix's offer of a friendly takeover in favor of some fresh action with Koei, while Electronic Arts is rumored to have "walked away" from merger talks with Take-Two.

Square Enix proposed the takeover of Tecmo at the end of August, expressing its admiration for the company's "excellent creators with (a) proven track record" while at the same time suggesting its "current circumstances," which is a polite way of saying management, are keeping the company from achieving its true potential. Square Enix offered $8.46 per share for the company, a 30 percent premium over its closing price on August 28.

But Tecmo apparently just isn't that into Square Enix, and has politely declined the offer. In a statement translated by Kotaku, the Ninja Gaiden and Dead or Alive publisher said, "For Tecmo, this proposal was received in a short span of time, but within the company, we collected opinions from management and game creators as well as a wide range of employees. In our company's source of revenues, as a result of a guarantee with our capable workers, a guarantee of steady game development and the preservation of our brand, there is a high possibility of improvement. However, we did not arrive to agree to this proposal, and thus, our Managing Board declines the offer." The statement concludes in uniquely Japanese fashion with, "Stockholders, clients and customers, please continue your favor towards our company."

Square Enix has not yet responded to the rejection, and while the company said the friendly merger wouldn't take place if the proposal was rejected - a point I would think is fairly obvious - it didn't say it wouldn't pursue the deal more aggressively if Tecmo refused to play ball. Tecmo may be moving proactively on that possibility, however, with a follow-up announcement, also at Kotaku, that it has entered into merger talks with Koei, another big-time Japanese developer and publisher. The two companies have already created an "Integrated Management Committee" as part of a tentative merger, and released a statement saying, "These two companies have excellent financial positions, strengths and the ability to take advantage of each other in order to improve profitability and solidify the foundation of a worldwide leader."

Meanwhile, on this side of the pond, word on the street is that Electronic Arts is sick of Strauss Zelnick's crap, and has walked away from "secret" merger negotiations with Take-Two Interactive. The rumor, reported by Stock market site Seeking Alpha, apparently caused a significant drop in Take-Two's share price, which opened Wednesday at $24.51 but dipped as low as $21.34 before closing at just over $23. Seeking Alpha ultimately discounted the rumor, citing the continued interest both parties appear to be showing, but a post on GamePolitics claims EA is "not especially fond of the Strauss Zelnick team at T2," particularly with regards to the deal Zelnick arranged for himself and company management in the event of a takeover.

Is EA just playing hardball? Did Zelnick push his luck a little too far? Take-Two's shares are slipping ever further below EA's proposed acquisition price of $26, making that deal look sweeter by the day; what will happen at Take-Two if the deal ultimately collapses? Only time will tell, but there's one thing we can be sure of: Deals will be done, money will be made, and games will be played.

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Disclosure(s): Strauss Zelnick, Chief Executive Officer and Chairman of the Board of Directors of Take-Two Interactive Software, Inc., is the head of ZelnickMedia, an investor in both Take-Two and Defy Media, LLC, our parent company. This article was published without approval or consent of ZelnickMedia or Take-Two.
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