With its most recent tender offer for Take-Two stock expiring at midnight, EA says that it will not renew the offer.
It seems, however, that the two companies have been talking. As per a just-issued press release, EA CEO John Riccitiello telephoned T2 chairman Strauss Zelnick on Friday. Zelnick apparently offered to provide EA execs with a secret presentation concerning T2’s game schedule for through 2011.
It’s unclear what EA’s decision not to renew its offer portends. It could be that EA has acquired sufficient T2 stock to seize control. Or, perhaps a new offer with a revised (i.e., lower) price structure is coming. Take-Two stock (TTWO) closed at $24.84 on Friday, nearly a dollar below EA’s $25.74 tender offer. As Riccitiello points out, the proposed takeover has dragged past the point where an acquisition of T2 will provide a positive impact for EA’s holiday sales, so perhaps the deal is less attractive at this point.
EA also mentioned that the Federal Trade Commission will complete its anti-trust review of the proposed merger by Thursday, August 21st. The press release also included a letter dated today from Riccitiello to Zelnick as well as one Zelnick to Riccitiello dated last Friday:
Here’s Riccitiello to Zelnick:
Thank you for taking my call on Friday and for your response letter on August 17, 2008.
As discussed on Friday, given the passage of time, we have to validate the assumptions used in the model to support our offer price of $25.74 per share in cash. In addition, we no longer believe we can integrate Take-Two ahead of the important holiday season.
Accordingly, we require due diligence to support a transaction and are therefore letting the tender offer expire tonight. However, we are pleased to accept your offer to review your management presentation as outlined in your letter.
We continue to have great respect for Take-Two’s creative teams and products and are hopeful that we can work together to reach a mutually agreed transaction.
And here’s Zelnick to Riccitiello, dated yesterday:
Thank you for your recent expression of interest for Electronic Arts Inc. ("EA") to participate in Take-Two Interactive Software, Inc.’s (the "Company") formal process to evaluate the Company’s strategic alternatives. As you know, we have been willing to have EA participate in this process following the successful launch of GTA IV, and we are happy to include EA now.
As I mentioned when we spoke on Friday, our process begins with an in-depth management presentation. The Company has made significant strides since EA first expressed interest in the Company and this presentation includes material non-public information to which you would not otherwise have access, including information relating to our three year product release schedule and management’s financial projections. The presentation also includes information about the underlying factors that have driven our strong operational and financial performance. I believe our presentation will enable you to understand better the value of our Company to EA.
Prior to the management presentation, we will only require EA to enter into a confidentiality agreement. The agreement would be limited to provisions required to comply with federal securities laws and to ensure the Company’s ability to protect the confidentiality of the information shared with you. I can assure you that this requirement is the same as or more favorable to EA than that which we have employed with all other participants in the process.
We understand that a number of months have passed since you first expressed interest in the Company and, accordingly, we will act quickly to assist you in moving through our process. Once we execute a confidentiality agreement, we are prepared to schedule the management presentation immediately.