EA in Hostile Bid to Acquire Take Two

Entertainment software giant Electronic Arts announced today that it is seeking to merge with GTA publisher Take Two Interactive in what would be a two billion dollar deal. 

But Take Two is playing hard-to-get.

An EA press release claims that it offered $26 per share for Take Two stock in a February 19th letter from EA CEO John Riccitiello (right) to T2 boss Strauss Zelnick (left). After Take Two management rejected EA’s offer, Riccitiello decided to appeal directly to T2 shareholders. The $26 offering price represents a better than 60% premium over recent T2 share prices.

Said Riccitiello:

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.

But EA’s cash-laden offer also came with a warning:

There can be no certainty that in the future EA or any other buyer would pay the same high premium we are offering today.

For the full text of EA’s letter to Take Two, hit the jump…

Dear Strauss:

Thank you for your letter of February 15, 2008. While I appreciate its courteous tone and value our ongoing dialogue, I am disappointed that you have rejected Electronic Arts Inc.’s (“EA’s”) $25 per share cash offer to acquire Take-Two Interactive Software, Inc. (“Take-Two”) and declined to engage in the friendly negotiations we proposed.

We continue to believe that an acquisition of Take-Two by EA is in the best interests of your shareholders, employees and other constituents, and we remain interested in acquiring Take-Two. So, to further demonstrate our seriousness and encourage you to move forward now, I am writing to increase EA’s offer to acquire all of the outstanding shares of Take-Two to $26 per share in cash. This offer is subject to Take-Two agreeing by February 22, 2008 to commence negotiation of a definitive merger agreement and to permit EA to commence a limited due diligence review of Take-Two.

Our revised all-cash offer represents a 64% premium over Take-Two’s most recent closing price and a 63% premium over Take-Two’s 30-day trailing average price (based on prices as of market close on Friday, February 15th). We believe our offer represents a unique and compelling opportunity for Take-Two shareholders to maximize the value of their investment in the company, with materially lower risk than if Take-Two proceeds on a stand-alone basis.

We also believe that the transaction we are proposing represents a uniquely attractive opportunity for Take-Two’s creative teams and key employees. EA is a diversified leader with well-established franchises and proven intellectual properties, global reach, and significant financial resources. I know we both agree that Take-Two’s talented creative teams deserve a permanent home within a stable and growing publisher that provides these teams an environment to do what they do best – create great games. EA is organized in a four-label model that provides our creative teams the autonomy they need to fully realize their creative ambitions, while also providing a stable and supportive corporate and publishing infrastructure which allows them to best address the global marketplace. We have the resources to make the significant investments in technology and infrastructure needed for the most creative and innovative games in the industry. In short, a combination with EA would provide Take-Two’s studios and employees a combination of the right resources for investment and global reach, and the right environment to do their best work.

We believe that Take-Two’s shareholders would not be well-served by any further delay in negotiating and completing the proposed merger. While the videogame industry remains an attractive, high-growth business, the challenges and risks in the business are escalating, and the need for scale is becoming more pronounced. Despite steps taken since March 2007, Take-Two remains dependent on a limited number of titles, and has limited capital resources. In addition, Take-Two faces ongoing financial, legal and operating issues and a very intense competitive environment. Given these factors, we believe it will be increasingly difficult for Take-Two to create sustainable shareholder value and that Take-Two remains exposed to considerable risk of value loss.

We also believe that any delay in this proposed transaction works against the interest of Take-Two’s shareholders, because:

— There can be no certainty that in the future EA or any other buyer would pay the same high premium we are offering today. We place significant value on the ability to close the transaction relatively quickly so that EA’s strong publishing and distribution network, including our global packaged goods, online and wireless publishing organizations, can positively impact the catalogue sales of GTA IV and also the launch and sale of titles released later this year. We want to work with you and your team to complete the transaction in time to begin realizing its significant marketplace benefits in advance of this year’s holiday selling season.

— We believe Take-Two’s current share price already reflects investor expectations for a strong release of GTA IV as well as the longer-term issues that Take-Two faces. Once GTA IV ships, Take-Two will again be dependent on less-popular titles and face increasing challenges to compete with larger and better-capitalized competitors.

— With GTA IV shipping on April 29, development on this important title must now be essentially complete. We believe now is the right time to complete a transaction with minimal disruption for Take-Two.

We also believe the transaction we are proposing will create value for EA’s shareholders. In addition to the top-line benefits noted above, we can achieve bottom-line benefits by combining Take-Two’s and EA’s corporate and publishing infrastructures and by optimally supporting Take-Two’s creative teams and intellectual properties in EA’s decentralized label structure.

Considerable thought, time and resources have been put forth in developing this offer, and our Board of Directors unanimously supports it. Our offer is not conditioned on any financing requirement. It is subject to the satisfactory completion of a due diligence review of Take-Two, the negotiation and execution of mutually acceptable definitive transaction agreements, and the satisfaction of customary conditions to be set forth in such agreements. We are prepared to move forward immediately with formal due diligence and the negotiation and execution of a definitive merger agreement and believe that with adequate access to the necessary information and people, we can complete both in approximately two weeks. We believe that our due diligence review can be completed with minimal disruption, requiring only limited access to a small number of senior executives of Take-Two and its legal, accounting and financial advisors. We also have prepared a draft merger agreement that we can forward to you immediately.

Our strong preference is to conduct a private negotiation. If you are unwilling to proceed on that basis, however, we may pursue other means, including the public disclosure of this letter, to bring our offer and the compelling value it represents to the attention of Take-Two’s shareholders.

I am available to meet and discuss any and all aspects of this proposal with you and your Board. Again, we believe this proposal represents a unique opportunity to maximize value for Take-Two’s shareholders, and that the combined enterprise would be extraordinarily well positioned to build value for our respective customers, employees, developers and other business partners. We hope that you and your Board share our enthusiasm, and we look forward to hearing back from you by February 22.


John Riccitiello
Chief Executive Officer


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  1. 0

    […] The EA-Take Two saga roundup Posted in Business by Alex King on February 26th, 2008 at 23:23 As most of you have probably heard, EA recently attempted a hostile takeover of Take Two. Take Two refused the offer, and the past few days have been a flurry of analysis and news tidbits on the matter. Behind the jump lies our humble attempt to compile a comprehensive look at the topic as it stands today. […]

  2. 0
    Nathan ( User Karma: 0 ) says:

    GTA games are made by Rockstar, not Take-Two…. correct? Isn’t Take-Two just the publisher?

    If what I’m saying is true, R* could just start publishing their own games.

  3. 0
    metroidprimegmr says:

    PHHSSSSHH, I lost faith humanity a LONG time ago! Compared to when LucasArts cancelled the Sam & Max sequel weeks before its release in early 2004, this is NOTHING!

  4. 0
    Meleedragon27 ( User Karma: 0 ) says:

    Oh, god… will those imperialists at EA ever stop? Now, while I love the Sims and SimCity as much as the next guy (w00t, Will Wright… looking forward to Spore), I think it’s pretty obvious that a lot of franchises under EA’s wing get… how you say… raped.

    Fight the power, Take Two! You don’t need them to harass you! Viva la R*!

  5. 0
    Ken ( User Karma: 0 ) says:

    EA’s desperate because GTA is so popular and they want to milk it for all it’s worth, just like they do with Madden since it’s the only NFL game you’ll be seeing until 2013, then 2018, etc.

  6. 0
    Black Manta ( User Karma: 0 ) says:

    @ Flaps

    In a few more months it won’t matter. JT will have been disbarred by then.

    @ Tronik
    More like, “We are EA. We wish to improve ourselves. Your biolgical and technological distinctiveness will be added to our own. Your company will adapt to service ours. Resistance is futile.”

  7. 0

    […] GamePolitics.com is reporting on an acquisition proposal for Take Two that has now become public. In the proposal, EA is offering $26 per share for Take Two stock, a 60% premium over recent share prices. An EA press release claims that it offered $26 per share for Take Two stock in a February 19th letter from EA CEO John Riccitiello (right) to T2 boss Strauss Zelnick (left). After Take Two management rejected EA’s offer, Riccitiello decided to appeal directly to T2 shareholders. The $26 offering price represents a better than 60% premium over recent T2 share prices. […]

  8. 0
    Brent ( User Karma: 0 ) says:

    Lmao i love how EA words the letter. It make is sound threating. But i would say hold and hold and hold Ea want take two badly enough they will raise there offer.

  9. 0

    This massive industry consolidation is only good for shareholders and is not good for the creative side of the industry, not gamers themselves. EA’s titles are corporate and soulless and I can’t imagine what they would do to such Take-Two staples as GTA. Like Midnight Club? We won’t see another one if this happens. Like Mafia? Expect that to disappear in light of new crappy Godfather games. I hope that Take-Two shareholders will decide to reject the bid in the hopes that they can command a higher price after GTA4 ships. Make no mistake, that’s why EA is bidding now. They say the company won’t be worth what they’re offering later but they know that after GTA4 ships, $2 billion will be nothing to Take-Two.

  10. 0
    Saladin ( User Karma: 0 ) says:

    Tch. This TERRIBLE for the industry. Make no mistake about that. Losing Bioware to EA was bad enough, but Take 2? EA is totally overstepping the bounds of professionalism in the industry here. The worst part is how glaringly obvious the threat they made is regarding stock.

  11. 0
    Snipehunter says:

    Huh. Considering recent comments by Riccitiello, I have to admit that I didn’t see this coming. Maybe his intent is to run the take 2 studios as “city states” and basically leave them alone… Yeah, and maybe I’m just optimistic on a sunday morning.

  12. 0
    Andrew Eisen ( User Karma: 0 ) says:

    Judging by how they stood up for Mass Effect, maybe EA would be willing to do the same for Take-Two’s controversial titles.

    Andrew Eisen

  13. 0
    DeusPayne ( User Karma: 0 ) says:

    Didn’t someone from EA just say that they own too many IPs to be working on everything they want. They really don’t need any more, especially not just to be able to slap their EA stamp on GTA IV.

  14. 0
    attackgypsy ( User Karma: 0 ) says:

    @Creamy Goodness

    Blizzard got a really good deal. And got to remain independent as well. This is nothing like the Blizzard deal. EA is going to rip the company away from them.

    Expect this to take at least 2 years, involve the courts, and eventually see alot of people get fired.

    Take-Two is in for the fight of its life. Jack Thompson is nothing like this, but he must be laughing like crazy right now.

  15. 0
    Kerotan ( User Karma: 0 ) says:


    There will be loading screens with messages like “have you tried soliciting a hooker and then after you do it together, running her over with your car to get your money back?”

    EA just fear the wrath of the new biggest publisher….


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