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article imageEdgy Video Game Publisher Take-Two Rejects $2-Billion Takeover Bid

By David Silverberg     Feb 25, 2008 in Business
Electronic Arts pulled off a blockbuster bid recently as the video game giant attempted to buy Take-Two Interactive, the maker of the Grand Theft Auto franchise. Take-Two has rejected the offer, saying it provides ‘insufficient value’ to shareholders.
Digital Journal — Consolidation in the gaming industry is gaining momentum, and a recent example couldn’t make this trend any clearer: Electronic Arts wants to buy Take-Two Interactive for $2 billion or $26 a share. This announcement comes on the heels of what was assumed to be a friendly takeover attempt two weeks ago at $25 a share. Take-Two promptly rejected that bid and it looks like the upstart New York publisher is also stiff-arming the recent bid.
From EA’s perspective, the buyout makes perfect sense. In a released statement, EA CEO John Riccitiello said EA can offer “stable management with an executive team that truly understands games.” He also addressed gamers watching this bid closely, saying: "For people who buy and play games, know that we too are fans of Take-Two and Rockstar products and feel we can provide their creative teams with the support they deserve to continue to bring you more of their great games in the future."
Riccitiello is quick to mention games as often as he can, but the takeover bid is truly about market dominance. When Vivendi announced it would acquire Activision, you could almost hear every other gaming boardroom tremble with fear. Vivendi could become the world’s largest game publisher, a title previously held by Electronic Arts. With the number-one spot stripped from its portfolio, EA isn’t going to simply absorb the body blows in 2008. A buyout of Take-Two would bolster its upcoming release lineup while also giving it an appealing edge that Take-Two’s Rockstar label is known for.
But Take-Two wants no part of this bid, at least not so soon. Grand Theft Auto IV is due out April 29 and it’s no surprise EA wants that revenue. But Take-Two says it only wants to negotiate with EA on April 30, “given the great importance of the Grand Theft Auto IV launch to the value of Take-Two.”
Take-Two Interactive makes the popular video game franchise Grand Theft Auto.
In a statement about Take-Two’s bid rejection, Strauss Zelnick, Executive Chairman of the Board of Take-Two, wrote:
In addition to undervaluing key elements of our business, EA's proposal fails to recognize the value we are building through our ongoing turnaround efforts, which will further revitalize Take-Two.
As expected, Take-Two wants to play hardball. It doesn’t want to go gently into that white knight. It also wants to reap the windfall of the forthcoming GTA release. But Take-Two has to realize how EA offers incredibly versatile marketing strength and widespread distribution. EA’s name is always a brand gamers recognize, while Rockstar could be called a one-hit wonder with the GTA franchise. Should Take-Two join forces with EA simply to increase its bottom line, even if creative control now rests in the hands of EA executives?
Just like the Vivendi-Activision merger, an EA buyout of Take-Two could have massive implications for the gaming world. So far, it is the biggest gaming news of 2008 and will remain on the minds of gamers and market observers until the two sides come to an agreement. Or an impasse. Either way, the game ain’t over yet.
More about Electronic arts, Take two, Grand theft auto, Gaming
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