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EA bids for GTA firm: Take 2 - Synergies will benefit?
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Mon Feb 25, 2008 5:03 pm Reply and quote this post
US video game giant Electronic Arts has made an unsolicited $1.9bn (£968m) offer for the owner of Grand Theft Auto, Take-Two Interactive Software.

EA said it had gone public with its all-share offer after having pursued it privately since December.

Take-Two immediately rejected the offer, which was 50% higher than its closing price on Friday.

Its management said that EA was trying to pick up the company cheaply ahead of April's release of Grand Theft Auto IV.

"Electronics Arts' proposal provides insufficient value to our shareholders and comes at absolutely the wrong time," Take-Two chairman Strauss Zelnick said in a statement.


Latest round

BBC wrote:
But EA's chief executive John Riccitiello tried to appeal directly to shareholders.

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

EA added it was offering $26 a share, after Take-Two rejected $25 a share earlier this month.

If the deal were to go through it would be the latest round of consolidation in the gaming industry, following Activision's $18bn acquisition of the gaming unit of France's Vivendi, which was announced in November.

GI wrote:
Take-Two has labelled Electronic Arts' USD 2 billion buy-out offer as "inadequate" and "opportunistic", as EA attempts to take advantage of the struggling Grand Theft Auto publisher.


Take-Two's board rejected EA's offer last week, prompting Electronic Arts to yesterday reveal details of the proposed deal and to publish the full letter sent to the company from EA CEO John Riccitiello.

"We believe EA's unsolicited offer is highly opportunistic and is attempting to take advantage of our upcoming release of Grand Theft Auto IV, one of the most valuable and durable franchises in the industry," said the company.

Quote:
"Electronic Arts' proposal provides insufficient value to our shareholders and comes at absolutely the wrong time given the crucial initiatives underway at the Company,"
commented Strauss Zelnick, executive chairman of Take-Two.

Quote:
"In addition to undervaluing key elements of our business, EA's proposal fails to recognise the value we are building through our ongoing turnaround efforts, which will further revitalise Take-Two."


While Take-Two has rejected the initial offer from Electronic Arts, the company has said that it will be willing to enter discussions following the release of Grand Theft Auto IV on April 29.

"We believe this offer demonstrated our commitment to pursuing all avenues to maximise stockholder value, while we believe that EA's refusal to entertain this path is evidence of their desire to acquire Take-Two at a significant discount, whereas we believe this value rightly belongs to our stockholders," added Zelnick.

EA will be holding a conference call this evening to discuss the acquisition attempt.

Synergies will benefit:
Quote:
"We believe we can take games from Take-Two and sell more of them"


In a conference call to investors today, Electronic Arts CEO John Riccitiello and CFO Warren Jensen once again underlined their determination to see through a deal that would result in the acquisition of Take-Two and its constituent parts.

Although the Take-Two board rejected the USD 26 per share offer on Friday, worth around USD 2 billion in total, Riccitiello and Jensen were bullish about the benefits such a deal would bring.

"When we think about synergies, the first thing we believe we can do is really take advantage of our publishing strength globally, how we can advance these great IPs over mobile platforms, online and in our packaged goods business," said Jensen.

"The second thing we do is take a look at what we think we can do on the cost side operationally…We can keep our fixed costs fixed, and only add variable expense on both the publishing and corporate sides."

And Riccitiello noted that while Take-Two's profitability tended to rest on the release of Grand Theft Auto titles, that is something that could change should the deal go ahead: "We believe we can take games from Take-Two and sell more of them."

Quote:
"If you take a company like Take-Two in their off years - and you well know that they haven't made money in their off-GTA years - and imagine that revenue was higher and costs were lower because of the synergies on both ends, that they would be profitable in those years,"
he said.

Quote:
"Which is precisely why we say we have questions about their future as a standalone company, and view this as an attractive transaction for Electronic Arts inside of our infrastructure."


When asked about if the Take-Two board had revealed an offer point that they would accept, Riccitiello revealed that they had not.

Quote:
"To be truthful they did not give us an indication of a price that they were interested in closing this transaction, and to be frank we were very surprised that they would reject the USD 26 offer,"
he said.

"We view it as pre-emptive, it represents an enormous premium, and frankly a premium that I don't think they'll see at any time in the near future or in years to come, so it's a great deal for their shareholders - they did not give us an answer, but we're hopeful that they will shortly."

The offer to the Take-Two board will remain open for the time being, but could be withdrawn at any time, he added.

Contributed by Editorial Team, Executive Management Team
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