As we mentioned in the previous story, EA released some surprising info today:
- it will not renew its tender offer (expiring at midnight) to buy T2 shares at $25.74
- EA and T2 have been talking, with T2 preparing a secret presentation for EX execs
For expert analysis we turned to Michael Pachter (left) of Wedbush-Morgan who told GP:
It appears that EA is proceeding with a friendly deal. The two companies exchanged letters over the weekend, with EA saying the offer price would require review (meaning they are inclined to go lower) because the deal cannot be completed before the holidays. Take-Two's response was an offer of due diligence, including the presentation of non-public information under a non-disclosure agreement, intended to support a higher value.
EA accepted the offer of a presentation, and intends to allow its hostile tender offer to expire. This merely changes the proposal from hostile to friendly, and keeps the pressure on the FTC to rule by Thursday, as previously expected.
My guess is that the parties reach an accommodation shortly at a $1 - 2 premium to EA's current $25.74 offer. We have said this consistently since February 25, and continue to believe a deal gets done this month. If Take-Two management holds out for a price in the $30s, EA will go hostile again, likely at a price closer to $20. If Take-Two management negotiates a price below $27.50, I think a deal gets done.
The only surprise to me is that EA agreed to go friendly. I suppose that 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. 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 3-year release schedule and a list of cost control initiatives, but believe that it will allow TTWO management to save face. 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.