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Pachter: 'Take-Two's Board Has Made A Mistake'
Pachter: 'Take-Two's Board Has Made A Mistake'
March 26, 2008 | By Brandon Boyer

March 26, 2008 | By Brandon Boyer
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    7 comments
More: Console/PC



Following the Take-Two board's official rejection of EA's buyout offer, Wedbush Morgan's Michael Pachter has called the move a mistake, firmly stating the publisher has "virtually no chance of finding a better offer."

"We're frankly surprised by Take-Two's rejection of EA's offer," said Pachter, noting that shares of the publisher were trading at $17 immediately before the offer, and that shares of the company have not reached near EA's asking price of $26 since new management took over, and that the company "has consistently lost money for the last two years."

"We think that the Board has virtually no chance of finding a better offer," he said, and that "this deal... makes more sense for EA than for any other company, primarily because of the synergies from consolidation of the two companies' sports businesses. No other company is in the position to realize those synergies, which we believe are substantial."

"We agree that EA is being opportunistic," Pachter admits, "and completely accept as true that EA's offer was predicated on acquiring Take-Two before the shipment of Grand Theft Auto IV. To the extent that EA is forced to wait until after the game ships, we believe that EA will perceive Take-Two to be less valuable, and believe that its offer will be lowered, if made at all."

"In our view, Take-Two's Board has made a mistake," he says. "We believe that the company was positioned to extract a higher offer from EA by offering a friendly transaction, and its Board chose to continue its adversarial posture." While he says that EA's offer was not necessarily a "friendly" one, it only turned hostile after its first two friendly offers were rejected.

Pachter also says that "Take-Two's position that the company will have greater value after the release of Grand Theft Auto IV is naive at best, and disingenuous at worst," calling it "inconceivable" that reviews or first-week sales of the game will "impact the company's valuation in any meaningful way."

"Had they offered an olive branch," he concludes, "we think that EA may have increased its offer by $1 or more. Instead, the Board chose to reject EA's offer. Once the tender expires, we expect that EA will receive tenders of more than 50% of Take-Two shares, mooting today's recommendation. If the company does not receive majority control through a tender, we expect it to withdraw its offer, and we expect Take-Two shares to decline by 20% or so. This presumes that the market will expect EA to come back at a later date, which is not assured."


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Comments


Anonymous
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As of March 26th, 2008; 9:37 the stock is at $25.61. I'd say that is VERY close to $26 a share and has been that we since February 25th. What is Pachter talking about?!

Anonymous
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The EA offer was made on February 16th where the stock price was linguishing around $16. The offer was public by the 24th then the shares spiked close to $26 a share where they have been around since. The share price movement is in relation to the EA offer and not to do with Take-Two's believed intrinsic value.

Anonymous
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1st of all, who is EA to think that just because they offered T2 all this money they have to accept? Ever think that Take 2 likes being independent? Then this whole hostile take-over tactic that EA pulled was just downright dirty. I wouldn't want to do business with them either. I don't blame Take 2 for waiting upon the release of GTA IV. EA shouldn't be trying to dip into the profits of one of the most popular gaming franchises in gaming and in Take 2's arsenal. So, what if EA retracts their deal or doesn't offer as much later, I think we'll see that GTA IV will single handedly take T2 where they need to be.



Second of all, why would we want to do away with one of the only companies that releases sports titles rivaling EA? That would be just stupid! EA already sickened me with the NFL exclusivity deal and Madden just isn't that great. What happened to competition being the reason the consumers wins? What will encourage EA to create a better product without competition? If we could stop focusing on the financial aspects and focus more on the consumers, then maybe this industry could be even better!

Anonymous
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The investors and shareholders are only interested in money. To get a big return in what they've invested in the company. So they're going to sell to EA. Plus if EA walks away the stock of T2 will drop and hit rock bottom. T2 has no other choice now.

Anonymous
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All I can say is thank you Take-Two. All EA cares about is making money by selling the same franchise over and over again. Almost all new EA franchises score in the 70's. EA's way is to buy good studios, destroy the studio's independence, and then iterate over and over again the new IP's they now own. If this deal had gone through ALOT of people would have quit T2. Most of all the good devs would have quit for sure. All that makes the games good would be gone leaving only IP's left which EA would have butchered anyway. Just look at how many studio's EA's bought in the last few years, its ridiculous.



"makes more sense for EA than for any other company, primarily because of the synergies from consolidation of the two companies' sports businesses."



Are you kidding me??? consolidation == bye-bye all T2 sports games. T2 would be kicking EA's ass right now if they hadn't taken the NFL license. But now the only choice is Madden and EA no longer has any need to make Madden better. They could just release the same exact game with updated rosters and people would buy it because they want to play with the new players.



*I used to work at EA Tiburon where Madden is made and had to go through thier aquisition of Criterion.

Anonymous
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Oh well...Take Two will fall before the juggernaut.



Too bad too because that means EA's sports consolidation will be complete...and thus competition and improvement of their franchises (such as it is) will cease.



C'mon Sony...take some of that 10% better than Xbox360 sales bump and throw your root down (you remember us...we sold all those 'long tail' PS2 units for ya)!

Anonymous
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All your base are belong to us! I hope Take-Two implements the Poison Pill if a hostile takeover occurs.


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