Electronic Arts’ $2 Billion Offer for Take-Two: Rejected!

By Michael Santo
Editor-in-Chief, RealTechNews

Shades of another takeover bid we’ve been discussing - a lot - lately. On Sunday, Electronic Arts announced it has offered $2 billion in cash for Take-Two Interactive Software, best known for - what else? - Grand Theft Auto. Anyone want some Hot Coffee?

It didn’t take long for a response. Take-Two immediately issued a press release turning down the offer, saying it was a) unsolicited, b) inadequate.

The door’s not completely closed, however. In the press release, Strauss Zelnick, Executive Chairman of the Board of Take-Two said that Take-Two would be open for discussion - after the release of Grand Theft Auto IV in April. They indicated discussions could start as early as April 30th, the day after GTA IV is set to ship.

Electronic Arts made the following statements about the offer in a press release:

• The current offer is $26 / share. Take-Two’s closing price on Friday, Feb. 22 was $17.36.
• A $25 / share deal was initially made to Take-Two
• The TTWO board rejected the offer which led to EA making the offer public with $1 a share increase

EA is obviously ready to make everything about the offer and any follow-up proceedings public. In other words, they are prepared for a possible hostile takeover.

In fact, EA has created a special website devoted to the offer. The website published the press release, as well as other information, including a FAQ. One unusual aspect of the press release was the inclusion of EA’s letter to Take-Two - with a second offer - after their initial offer was rejected. I’m not going to print the whole letter, but here are some highlights:

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.

blah, blah … normally stuff about how great the offer is and how wonderful the deal would be for both parties …

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.

Obviously we’ve reached the public disclosure point. Did I already say shades of Microsoft / Yahoo!? It looks like EA is willing to go hostile. We’ll be watching.