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EA's tumultuous Take-Two takeover bid
Joined: Dec 31, 1969
|Post subject: EA's tumultuous Take-Two takeover bid
Posted: Mon Jan 05, 2009 2:48 pm
When the year started, most game publishers were cash-flush. So cash-flush, in fact, that one decided the time was ripe to buy out another. On February 24, the world reverberated with the sound of millions of morning-coffee spit-takes as Electronic Arts announced that it wanted to buy Take-Two Interactive for $2 billion.
Speaking with GameSpot, EA CEO John Riccitiello called the $26 per share offer--a 64 percent premium over Take-Two's then-stock value--"a great deal for their shareholders." Unfortunately for said shareholders, Take-Two's board of directors dismissed the offer as "undervalued," despite analysts faulting it for being too generous.
Thus began a six-month courtship that had the game industry transfixed with every move. "Courtship" might actually be the wrong term, considering that by mid-March EA's bid had turned hostile, despite a lackluster earnings report and restless shareholders.
Chairman Strauss Zelnick and the rest of Take-Two's board staved off a takeover by convincing said shareholders that Grand Theft Auto IV's launch would turn the company's fortunes around. Sure enough, the game's launch on April 29 was the biggest of all time, generating $500 million in sales in a week.
Ironically, GTAIV's success ended up costing Take-Two shareholders hundreds of millions. After extending the offer's deadline from March to April, EA lowered its offer due to the approval of a "poison pill" measure that would dilute Take-Two's stock in the event of a takeover attempt. It kept in the game, though, re-extending the overture to May, then June, then July, then August. Alas, no deal could be made. On September 14, EA finally walked away for good, sending Take-Two's share price into a free fall. By December, it was trading at around $11 a share, less than half of EA's original offer.
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