Marketwatch Columnist: Did T2 Management Put Self-Interest Ahead of Shareholders?

February 25, 2008 -
Marketwatch columnist Herb Greenberg, often criticial of Take Two in the past, takes a cynical view of the Grand Theft Auto publisher's rejection of EA's acquisition offer:
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...

That’s beyond absurd. Makes you wonder which shareholders the company puts first.

GP: A source at Take Two termed Greenberg's theory as "drivel."

Comments

@Father Time

Probably because it takes longer than a day for the stock to drop back down. Plus a combination of other things probably. It's unlikely EA is going to go away this easily, so the influence remains. Not to mention that EA valuing Take Two at $26 a share raises the stock's value a bit in and of itself.

It'll be interesting to see how this turns out. I'm hoping that EA gets firmly turned away and gives up. Bad things about EA aside, Zelnick seems to be doing a fair job of turning around the mess the previous crowd had made of TT. It's not like they're a small developer, they're a fair sized publisher. With decent management, they shouldn't need to be bought out to do well for themselves and their shareholders.

It is not surprising that the stock just rose. That usually happens when a high profile merger/buy out is in the ropes.

Once all the talk of buyouts quiet down the stock will drop again.

@Belgarion89 - Good call indeed :) I just checked and stock prices are really going crazy! Up to 25.6 already!

Good call take two, at this rate your shares will be worth more than the offer before the end of the day :)

So where does this guy get his info? from what i understand, Take Two was outright with informing the public and did not try to cover it up. Some more info if you would about your sources please. Or is this all just speculation?

Bill Harris at Dubious Quality has a pretty good summation of the above article.

http://dubiousquality.blogspot.com/2008/02/skullduggery.html

While I have no love for EA, they killed Looking Glass and Westwood, I won't
cry any tears for Take-Two. Between the Bioshock DRM fiasco, which I'm still pissed about(yes I am that petty) to the their apparent corrupt management I don't believe you can make a case for them as champions of the game community.

@GrlGmr

Thanks for the clarification. I was going off of memory and got my "E" companies mixed up.

As for better business men, bring back Trip Hawkings! At least we know he cares about the gaming on the whole.

[...] via GamePolitics [...]

EA could have easily watered down Take Two's games, especially from Rockstar, killing sales and drivign down stock prices. So, I think Take Two did more good than harm.

How could anyone find T2 refusing to be bought out by EA as a bad thing? By not letting EA turn T2 into a "progressively worse sequel" manufacturing machine, I think T2 is ABSOLUTELY looking out for its shareholders.

Eat it EA! You're not Activision!!!

@Skylar

Two ways. They're worried more about immediate profits instead of long term, and if you're hoping, praying that EA gets the company so any non favorite franchises get ruined

This guy's complain that "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…" - perhaps someone can correct me, but this sounds like the stock agreement has a poison pill provision. For those who don't know, such a provision allows for the board to grant a large number of new shares in order to thwart a hostile takeover. Suddenly EA has to pay a lot more money to buy a lot of these new shares if they want to control TT. And poison pills are not all that uncommon - they're common enough that there's a term for it. So TT having one shouldn't be all that peculiar. So, yes, I'm also going with 'drivel' on this one.

really, how long is it going to be before EA is considered a monopoly? If they aquired T2 and therefor where the only Sports Game business around...would that not constitute a monopoly?

Quoted from the letter from EA to T2

"We do not intend to make this letter public and our offer will automatically terminate and be withdrawn in its entirety if any portion of this letter, or the existence of discussions between EA and Take-Two relating to a possible business combination, are disclosed to any person other than the directors and officers of Take-Two and its legal and financial advisors."

So T2 merely complied with the requests of EA who have since gone back on their word and even published a website with their hopes to buy out T2. Obviously Greenberg didn't do his research...

T2's stock price just rose 46%, now up to $25.45. Considering EA was offering $25 even, I'd say they made a good call.

Yeah, I'd say Take Two did the right thing. Even if the money was a good offer (and given that Take Two's stock price just rose, probably not) I don't think selling out would help them creatively.

And I'm almost certain EA doesn't want to deal with Jack Thompson every day.

in todays lesson we learn that stocks go up (allow me to explain see when gta 4 comes out tt will make LOTS of money which will cause their stock to SOAR)

Also, the fact that the share prices have gone up so much so quickly kinda makes this guys point completely invalid...

I'm sure the shareholders are very happy right now :)

They simply believe that take 2 will be worth far more than that after grand theft auto 4 goes on sale.

They simply believe that take 2 will be worth far more than that after grand theft auto 4 goes on sale.

This here.

I'm curious as to how high they expect it to go after GTAIV. I'm anxious to find out how high it does go.

They simply believe that take 2 will be worth far more than that after grand theft auto 4 goes on sale.

It's already worth more... check the share price.

This entire deal is just EA trying to make a quick and easy profit. EA knows that TakeTwo's stock is going to EXPLODE after GTA IV comes out. EA was paying what would be a good price today so they could make a metric ton of money after GTA IV is released. Here's the deal though: why should TakeTwo let EA get in on all the GTA IV money when TakeTwo has done all the work?

On a personal note a company that doesn't let itself be bought out by EA just jumped up a notch in my book. Just say no to a company that ruins developers.

The T2 shareholders need to be aware that if EA does acquire T2, that the whole reason - GTA - would suddenly become just another 'EA game' - complete with 32 expansion packs and 32% (or more) less interested customers.

EA ruins games, not accepting the offer was the best thing for everyone except the one-sequel-a-year company EA where every game made this year is exactly like one made last year.

EA may as well scratch art from their title. Art implies creativity, EA has none.

truly trying to buy a company right as a massive game is about to be realised is lame. I had to laugh at all the talk EA did during the Mass Effect Controversey "The hard working employees who created our game" what work did EA do except buy em' at the last minute to get that fat Mass Effect cash.

I was gonna ask if EA wasn't famous for sucking, but it looks like everyone here already has that covered. Oh, I did it anyway.

T2 did a very good thing, by not pressuring to EA, it has given a clear signal to EA, that you can't buy eyerything. If T2 were to become an asset of Ea, then they would have little to no competition in the sports genre, and if there is one genre that need more innovation, it's the sports area.

Just a follow up on my last comment: what was the last successful game EA made?

@ Tristram - Published or made? There is a big difference... As far as "made" goes, I'd say Fight Night Round 3 was the most recent one that I really liked. As far as published goes, they most recently did Mass Effect... so the definitely bring out some quality games.

However, having said all that I am inclined to point out what I said in my last two posts:

TAKE TWO'S SHARE PRICE IS ALREADY WORTH MORE THAN $25!

So you can stop all the speculation. That deal is dead in the water now that the share price has climbed so steeply.

So no Take Two for EA :)

Ooh, to update. Take Two's share price is, infact, worth more than $26 :)

All good, keep on climbing...

@L42yB

I typically say EAdoes a lot right, but they do a whole hell of a lot worse.

I hope to god Take Two's shareholders tell EA to go to hell.

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

Well... he was right.... he'll have to dish out a WAY higher premium to entertain another offer.

I think what's absurd is the columnists' opinion.

Why would Take Two sell to EA two months ahead of the biggest game release of the year?

Take Two's shares are indeed more than $25 per share right now and that number keeps going up the closer we get to launch date for GTA IV. How much would T2 stand to lose should they accept the deal? Let's kick a little math. EA offers $2,000,000,000 for a complete takeover of T2, which works out to $25/share. That's 80,000,000 shares. At this very moment, T2's price per share works out to $26.40 (Source: GP Ticker), which leaves a remainder of $1.40 from the $25 that EA was offering per share. Doesn't seem like much of a lowball, but when you multiply that remainder by the amount of shares, it amounts to a whopping $112,000,000. That's a huge amount of money for any company to consider losing, regardless of size. I'd say that was a pretty good call on T2's part.

That being said, Jack Thompson will probably try and find some legal precedent to use against them in this whole thing. Maybe this time his motion will be submitted in the form of a pop-up book.

@L42yB, the stock price is up BECAUSE of the buyout offer. If the offer doesn't materialize, the stock price will go back down to whatever it was on Friday. It's called arbitrage.

The stock price doesn't currently reflect the true open market price of Take Two. It reflects the premium price EA was willing to pay.

If the terms of the buyout change in any way, e.g. it's withdrawn completely, or the price changes, Take Two's stock price will IMMEDIATELY reflect this new value.

Id rather EA not own T2. Overcommercialization will kill the innovative spirit of the game industry.

Anyone find it odd that is seems Take Two is making the morally right decision here?

@Father Time, I don't think morality has anything to do with this. It's a business decision, and it was justified with business reasons as well. Zelnick could've gone and discussed the monopolistic EA behavior, if he wanted to, but he didn't. Instead he turned the offer down believing he'd get more money out of EA (or any other buyer) after GTA IV launch.

@Father Time

Never look a gift horse in the mouth. GTA IV is fucked if EA get T2.

@Father Time:

This is business. Morality doesn't enter into the minds of those running public companies.

Funny how EA has replaced Microsoft as the Evil Empire. Just how many games, from studios, purchased by EA, went on to bomb in the next release? An what if, the studio, left on its own, produced the game, only to bomb? Would the two situations be the same from an objective viewpoint?

Someone give me a real list of game franchises, produced by an individual studio, then purchased by EA, to produce a crappy sequal?

but hey we'd get to look forward GTA 2008/09/10/11/12/13 Winter special/13 Summer special/14 and 15

EA= Electronic Amoeba

Does it not worry anyone else here that EA has been going on a buying frenzy of any popular competitor they can see?

This guy on CNBC just pretty much said programmers aren't important, just the customers... I'm sure he means the same thing for everyone else involved as well.

Yeah, the guys responsible for building a franchise since GTAIII and doing much of the work (including the art guys) aren't important. *rolls eyes* GTA is dead if the key people that have been behind it since GTAIII are gone.

If EA gets T2, then that's it for quality. Take Two is just looking out for the gamers. I still can't believe that after EA says that it's strategy of buying up companies was a mistake, it's still trying to do it.

This doesn't have much to do with GTA I don't think, this is about EA Sports trying to get the monopoly.

However, I imagine T2 would try to hold out until after the GTAIV release, which will more than likely see a jump in share prices.

I doubt Take Two will sell out even after GTA4 releases. Apparently Take Two knows what long term means.

@ PheonixZero

Some other guy on CNBC just proved his utter lack of knowledge of the game market by talking about GTA 1 and 2.

I don't know if this has been discussed already, but EA stocks started this week today 2 dollars lower than Friday....so I'm assuming the deal going public and T2 saying no hit EA stocks a little bit
 
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