After grinding along for six months with no end in sight, Electronic Arts' pursuit of Take-Two Interactive has come to an end... or has it?
The most recent extension of EA's tender offer for Take-Two shares is set to expire at midnight, and somewhat surprisingly the company has announced it will not be renewing the offer. EA first launched its hostile takeover attempt of Take-Two all the way back in February, but met with limited success in enticing investors to sell, and now, according to Vice President of Corporate Communications Jeff Brown, the situation has changed.
"We've been pretty consistent about this from the start. All along, we said that the model was dependent on getting their titles for distribution for Christmas this year," Brown told Gamasutra. "It is now clear we passed a threshold, and that's not going to happen. With that, it changes our economics and we are stepping away."
But while the company's apparent loss in the Take-Two sweepstakes may come as good news to EA haters everywhere, the end of the hostile takeover bid may actually signal the beginning of a new, and friendlier, relationship between the two companies. In a press release, EA said its CEO, John Riccitiello, had spoken to Take-Two Chairman Strauss Zelnick on August 15 to discuss the matter, and that following further talks over the weekend, Take-Two offered to provide EA management with "non-public information" regarding release schedules and financial projections.
"We welcome EA into our formal process and look forward to demonstrating to their Board the significant strides made by Take-Two since they last undertook a detailed review of our business in early 2007," Zelnick said in a press release confirming the arrangement. "Our Board remains unwavering in its belief that EA's unsolicited conditional tender offer of $25.74 per share was inadequate and undervalued Take-Two's world-class entertainment franchises and our strong operational and financial performance."
Correspondence between the two executives indicates a conciliatory approach coming from both camps. In a letter to Riccitiello, Zelnick said Take-Two would "act quickly" to get the ball rolling, promising that "once we execute a confidentiality agreement, we are prepared to schedule the management presentation immediately." For his part, Riccitiello said EA was "pleased to accept the offer," and expressed his "great respect for Take-Two's creative teams and products" and hope that a mutually-agreed transaction could be reached.
Despite the apparent loss of immediacy in EA's interest, analyst Michael Pachter predicted the deal would still be done for a small premium over the value of the current offer, although he did express surprise that EA has switched to a "friendly" takeover attempt. "I suppose they figured it was magnanimous to make the attempt, and Take-Two management recognized that this was its last and only opportunity to affect the outcome," he told GamePolitics. "I really expect the parties to reach an agreement close to the $25.74 price (slightly above)."
"I do not expect EA to be impressed with the presentation, which will include a three-year release schedule and a list of cost control initiatives, but believe that it will allow TTWO management to save face," he continued. "EA is unconcerned about cost control, since it will eliminate most operating expense once Take-Two is integrated, and should not be particularly surprised to learn that GTA 5 and BioShock 2 are planned."