Wow.
For those of us that were wondering how Electronic Arts would respond to Activision's merger with Blizzard, the answer has arrived. Electronic Arts has proposed an acquisition bid for Take-Two Interactive, which would give EA the highly lucrative and mega-popular Grand Theft Auto franchise, as well as other IP like BioShock and Duke Nukem. Unfortunately Take-Two announced today that it rejected the proposal as "inadequate." Read on for the official statement for EA.
Redwood City, Calif., Feb 24, 2008 -- Electronic Arts Inc. ("EA") (NASDAQ: ERTS) today announced that it has proposed to acquire Take-Two Interactive Software, Inc. ("Take-Two") (NASDAQ: TTWO) in an all-cash merger valued at approximately $2.0 billion.
EA's proposal of $26 per share in cash represents a premium of 64 percent over Take-Two's closing stock price on Feb. 15th, the last trading day before EA sent its revised proposal to Take-Two, and a 63 percent premium over Take-Two's 30-day trailing average price over the thirty trading days ending on that date.
EA's proposal was contained in a letter sent on Feb. 19th by EA Chief Executive Officer John Riccitiello to Strauss Zelnick, Executive Chairman of the Board of Directors of Take-Two. The Take-Two Board's subsequent rejection of the EA proposal led to EA's decision to release the letter and bring its proposal to the attention of all Take-Two shareholders.
Mr. Riccitiello said today: "Our all-cash proposal is a unique opportunity for Take-Two shareholders to realize immediate value at a substantial premium, while creating long-term value for EA shareholders. Take-Two's game designers would also benefit from EA's financial resources, stable, game-focused management team, and strong global publishing capabilities."
The EA letter warned that further Take-Two delay in accepting EA's proposal could prevent Take-Two's shareholders and other constituents from realizing its benefits. "There can be no certainty that in the future EA or any other buyer would pay the same high premium we are offering today," Mr. Riccitiello wrote. The letter added that timely completion of the proposed transaction would allow EA's strong publishing and distribution network to positively impact the ongoing post-launch sales of GTA IV and support the new Take-Two titles scheduled for launch later in the year and during the holiday selling season.
As noted in EA's Feb. 19th letter, EA's proposal is not conditioned on any financing requirement. It is, however, subject to certain customary conditions as set forth in the letter. EA's $26 per share proposal is based on the current equity capitalization of Take-Two. Although EA indicated in the letter that its proposal was subject to negotiations commencing by Feb. 22nd, EA intends to keep its proposal open for the present to give Take-Two's shareholders and Board of Directors further time to consider it.
The full text of EA's letter to Take-Two follows:
February 19, 2008
Mr. Strauss Zelnick
Executive Chairman of the Board of Directors
Take-Two Interactive Software, Inc.
622 Broadway
New York, NY 10012
Dear Strauss:
Thank you for your letter of February 15, 2008. 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. This offer is subject to Take-Two agreeing by February 22, 2008 to commence negotiation of a definitive merger agreement and to permit EA to commence a limited due diligence review of Take-Two.
Our revised all-cash offer represents a 64% premium over Take-Two's most recent closing price and a 63% premium over Take-Two's 30-day trailing average price (based on prices as of market close on Friday, February 15th). We believe our offer represents a unique and compelling opportunity for Take-Two shareholders to maximize the value of their investment in the company, with materially lower risk than if Take-Two proceeds on a stand-alone basis.
We also believe that the transaction we are proposing represents a uniquely attractive opportunity for Take-Two's creative teams and key employees. EA is a diversified leader with well-established franchises and proven intellectual properties, global reach, and significant financial resources. I know we both agree that Take-Two's talented creative teams deserve a permanent home within a stable and growing publisher that provides these teams an environment to do what they do best - create great games. EA is organized in a four-label model that provides our creative teams the autonomy they need to fully realize their creative ambitions, while also providing a stable and supportive corporate and publishing infrastructure which allows them to best address the global marketplace. We have the resources to make the significant investments in technology and infrastructure needed for the most creative and innovative games in the industry. In short, a combination with EA would provide Take-Two's studios and employees a combination of the right resources for investment and global reach, and the right environment to do their best work.
We believe that Take-Two's shareholders would not be well-served by any further delay in negotiating and completing the proposed merger. While the videogame industry remains an attractive, high-growth business, the challenges and risks in the business are escalating, and the need for scale is becoming more pronounced. Despite steps taken since March 2007, Take-Two remains dependent on a limited number of titles, and has limited capital resources. In addition, Take-Two faces ongoing financial, legal and operating issues and a very intense competitive environment. Given these factors, we believe it will be increasingly difficult for Take-Two to create sustainable shareholder value and that Take-Two remains exposed to considerable risk of value loss.
We also believe that any delay in this proposed transaction works against the interest of Take-Two's shareholders, because:
-- There can be no certainty that in the future EA or any other buyer would pay the same high premium we are offering today. We place significant value on the ability to close the transaction relatively quickly so that EA's strong publishing and distribution network, including our global packaged goods, online and wireless publishing organizations, can positively impact the catalogue sales of GTA IV and also the launch and sale of titles released later this year. We want to work with you and your team to complete the transaction in time to begin realizing its significant marketplace benefits in advance of this year's holiday selling season.
-- We believe Take-Two's current share price already reflects investor expectations for a strong release of GTA IV as well as the longer-term issues that Take-Two faces. Once GTA IV ships, Take-Two will again be dependent on less-popular titles and face increasing challenges to compete with larger and better-capitalized competitors.
-- With GTA IV shipping on April 29, development on this important title must now be essentially complete. We believe now is the right time to complete a transaction with minimal disruption for Take-Two.
We also believe the transaction we are proposing will create value for EA's shareholders. In addition to the top-line benefits noted above, we can achieve bottom-line benefits by combining Take-Two's and EA's corporate and publishing infrastructures and by optimally supporting Take-Two's creative teams and intellectual properties in EA's decentralized label structure.
Considerable thought, time and resources have been put forth in developing this offer, and our Board of Directors unanimously supports it. Our offer is not conditioned on any financing requirement. It is subject to the satisfactory completion of a due diligence review of Take-Two, the negotiation and execution of mutually acceptable definitive transaction agreements, and the satisfaction of customary conditions to be set forth in such agreements. We are prepared to move forward immediately with formal due diligence and the negotiation and execution of a definitive merger agreement and believe that with adequate access to the necessary information and people, we can complete both in approximately two weeks. We believe that our due diligence review can be completed with minimal disruption, requiring only limited access to a small number of senior executives of Take-Two and its legal, accounting and financial advisors. We also have prepared a draft merger agreement that we can forward to you immediately.
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.
I am available to meet and discuss any and all aspects of this proposal with you and your Board. Again, we believe this proposal represents a unique opportunity to maximize value for Take-Two's shareholders, and that the combined enterprise would be extraordinarily well positioned to build value for our respective customers, employees, developers and other business partners. We hope that you and your Board share our enthusiasm, and we look forward to hearing back from you by February 22.
Sincerely,
John Riccitiello
Chief Executive Officer
Comments (26)
I know EA was really going after the Duke Nukem franchise. That alone would be worth the $2bil offer.
Posted by Nate | February 25, 2008 12:25 AM
Posted on February 25, 2008 00:25
NO!!!!!!!!! Dont give in to the evil corporation!!!!!!!!!
Posted by Hunter | February 25, 2008 1:27 AM
Posted on February 25, 2008 01:27
Great, I can't wait til Madden 2K9 comes out.
Posted by Ed | February 25, 2008 5:09 AM
Posted on February 25, 2008 05:09
Noooooooooooooo everything EA touches turn to crap!
Posted by JROC | February 25, 2008 6:35 AM
Posted on February 25, 2008 06:35
dont do it T2, they'll dumb down gtaV and make it like the sims!!!
Posted by deezy | February 26, 2008 12:57 AM
Posted on February 26, 2008 00:57
E.A. should take some of that money to make the huge amount of games they already own better... or maybe TO PATCH SOME OF THEIR CURRENT GAMES. Anyone remember the BF2 thing? In a month, no patch to fix the memory leaking problems, but an extra money grab expansion pack, which sucked and made online play even more unbalanced.
E.A. is a giantic money sucking leech on this world, except I don't think there has ever been a leech the Size of Vancouver.
DON'T LET THEM RUIN GTA!!!
Posted by Hater | February 26, 2008 6:53 AM
Posted on February 26, 2008 06:53
Hang in there Take 2... EA is crap, it just buy's companies to shredd them to make a hole lot of money... Don't ruin your reputation, be strong and give us games that are really worth buying... (when i first saw fifa08 it looked like i just started a fifa05 or something, really bad graphics), I hope EA learns to do new games and not "updating" (changing 06>07>08) their current ones.
Posted by V3ctorPT | February 27, 2008 8:27 AM
Posted on February 27, 2008 08:27
EA will shaft T2s employees like they always do, meddle in their company with beaurocratic ineffciency, and generally just manhandle their success like always.
If T2s employees would be happy making the same games for years to come, well it'd be a good deal.
Unfortunatley, T2s employees will leave if EA buys them, so this is a bad deal for T2 in the end.
Posted by David, Portland Oregon | February 27, 2008 9:07 AM
Posted on February 27, 2008 09:07
Can everyone already see the lights, GTA underground, GTA most wanted, GTA carbon, GTA unlimited.......we all get the drift.
Posted by annoyance | February 27, 2008 3:10 PM
Posted on February 27, 2008 15:10
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.
I found this piece of the letter very intimidating and downright they are bullying Take Two in order for them to give in to their demands of accepting the 2 billion offer.
I read the whole letter and clearly it has some very harsh tone to it.If I were them,I will refuse the offer and screw their ass back with a reply letter
Posted by Gabriel Logan | February 27, 2008 4:36 PM
Posted on February 27, 2008 16:36
if EA adquires T2, it will send all the good games to the deep where games suck and patches turn games into unplayable crap.
Posted by the warp | February 27, 2008 8:05 PM
Posted on February 27, 2008 20:05
EA 'offers' to buyout TTWO and gets rejected, and I make lots of money!! The best of both worlds.
Posted by upl8n8 | February 28, 2008 3:49 AM
Posted on February 28, 2008 03:49
F*** Electronic Arts! They should take that $2 offer and spend it making their company better not buying out other companies that pose a threat to their world dominance attempt!
EA! Spend more on your staff and games, and less buying out!
Posted by Rod | February 28, 2008 5:46 AM
Posted on February 28, 2008 05:46
The rejection of EA's 2 Billion Dollar offer means a lot to me, and really ails the bad blood boiled by Take 2's quasi-retarded D.R.M. crap they've been trying to pull with their games. Not selling out to EA was a good move, and will earn the respect of the consumer, such as myself.
If anything, T2 should merge with a company on a similar level with itself for benefits. Mergers should be mergers, buyouts are just a way of telling me that the company doesn't give a sh*t about anything but money. Like EA, for example.
Posted by Commander Keen | February 28, 2008 7:52 PM
Posted on February 28, 2008 19:52
EA Games is the ass of the gaming industry.
That place is where awesomeness goes to die.
Posted by Bob | February 29, 2008 8:32 AM
Posted on February 29, 2008 08:32
"game-focused management team".
Oh you heard that? yeah that was me throwing up a little in my mouth. EA is profit driven not game driven. Eat up a franchise release a sequel unpolished and watch it die.
Posted by Gamer | February 29, 2008 4:34 PM
Posted on February 29, 2008 16:34
Way to go Take-Two!!!!!
Posted by Drew | March 1, 2008 5:36 AM
Posted on March 1, 2008 05:36
I can already see that EA's bullying tactics are not going to work. Hostile\back room takeovers are ok for acquiring crappy overvalued corps, but TakeTwo is not one of those company's. Also it just gives your co. a bad (or in EA's Case a worse) reputation. I already posted on their forum as well as emailed EA about their sports franchise's poor and exactly the same quality year after year. If anyone cares to read my constructive critique go here.
http://forums.easports.com/mboards/thread.jspa?threadID=341717
As you can see from the forum replies, no one cares.
Posted by Mr Roboto | March 1, 2008 9:59 PM
Posted on March 1, 2008 21:59
Good job Take-Two!!!!!!!!
Don't let them get their hands on your stuff. I've hated what EA has been doing for years. They are buying what ever they can and putting an EA on it. They have done some things good but we need to have other parties out there with the ability to make games. EA is going to corner the market one day but hold them off if you can. This is for all the game makers out there, we need to fight back and hope more game company's see it that way. I hope they all don't die for the dollar... Live for the GAMER!!!!!
Posted by Jimmy | March 2, 2008 8:35 PM
Posted on March 2, 2008 20:35
Let me add my support for Take 2 for standing strong. EA is trying to bully you, they are hardly subtle about it - despite their words to the contrary.
Seriously EA, it may be better to get somebody who sounds a little less like a used car saleman on your team ("take the deal, you'll never get anything better" - c'mon, seriously?).
EA is big business and bid money - no doubt they have power. But they have forgotten what got them there, what they have been lacking in recent times, vision, innovation and a serious interest in making good, quality games. The fact that they would just rather buy companies that make good games, instead of getting their own act together and just *make* good games themselves says it all.
But stay strong Take 2, stay independent and keep making good stuff. In the end, you'll be making bids to buy out EA.
Posted by ShawnDoe | March 2, 2008 10:35 PM
Posted on March 2, 2008 22:35
I applaud Take Two for not giving in to EA's demands. EA has lost all respect from me after releasing BF2. They're a money driven company and, seemingly, care nothing about quality and re-playability. Instead of releasing a WORKING game, new graphics/content or God forbid a PATCH they'd rather release lame expansion packs that create even more bugs and only expand upon existing bugs.
Stand strong against EA. They will only ruin Take Two in the end. Take Two cares about quality of games, re-playability and the continuance of a franchise. They don't release a game until it is ready to be released unlike EA who pushes things out as fast as they can with no regard for quality. (Hence the GTA 4 delay)
I personally will not buy another EA game until they start to actually care about things that should be essential in a game company : QUALITY!
( I know for a fact I'm not the only person who feels this way...)
Posted by Charles | March 3, 2008 9:35 AM
Posted on March 3, 2008 09:35
Yeah to hell with EA. I am still pissed about Earth and Beyond!
Posted by Seaborn | March 4, 2008 5:57 PM
Posted on March 4, 2008 17:57
I hope this doesn’t happen. I can never get EA games to run on my XPS600 and I stay away from anything with the EA logo on it. Take two may be small but I love the quality and entertainment value of their titles, Bioshock was just amazing. Take 2 Please please please stay away from EA.
P.S you’d be better off joining up with Valve. At leaset keep using their Steam online purchasing system
Posted by Mattzilla | March 5, 2008 6:13 PM
Posted on March 5, 2008 18:13
They better seal the deal before Microsoft purchases the world. "HAHAHHAHAA"
Posted by L3V3L_UP | March 7, 2008 12:17 AM
Posted on March 7, 2008 00:17
Is it just me or does it seem that EAs money grubbing CEOs could do a lot better with instead of finding what company makes good games buying them striping them for money then selling them as scrap then repeating with instead making games building a reputation selling games and repeating that? That way thy could spend money on protective stuff and still making money isn’t that a good idea??
Posted by arah | March 8, 2008 6:17 PM
Posted on March 8, 2008 18:17
EA offers good value to Take2 shareholders. Money is the only thing that matters here. Take2 should pay close attention.
Posted by Nick | March 14, 2008 10:05 PM
Posted on March 14, 2008 22:05