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FTC Greenlights EA Take-Two Merger
by Leigh Alexander
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August 20, 2008
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The Federal Trade Commission says it's approved a potential acquisition of Take-Two by Electronic Arts, according to correspondence the FTC posted on its website.
"Upon further review of this matter, it now appears that no additional action by the commission is warranted at this time. Accordingly, the investigation has been closed," the FTC wrote, closing an especially wide-ranging investigation of the proposed transaction.
Approval by the FTC was one of the major remaining hurdles that stood between EA and its objective; alongside a "poison pill" implemented by Take-Two's board, the largest obstacle is the fact that the two companies have yet to agree on an appropriate per-share asking price.
Take-Two has on numerous occasions rejected EA's $2 billion tender offer ($25.74 per share) as "inadequate," while EA has extended the bid since February, ostensibly to allow the FTC's review process to complete, as the company's said.
Earlier this week EA announced it would allow the long-standing offer to expire, and has said it's still "hopeful" that it can reach an agreement through discussions with Take-Two. Take-Two board chairman Strauss Zelnick has offered EA his company's due diligence -- which, according to Reuters, consists of Take-Two's three-year release pipeline and its financial forecasts.
The two companies are expected to review and discuss what per-share price the diligence supports, while analysts expect that a stalemate will continue in the near term, fueled largely by what's been called executive ego. Wedbush Morgan's Michael Pachter says he expects an acquisition "later this year," at a $1 or $2 per share premium to EA's current offer.
"As noted earlier this week, we now require due diligence to support any proposal to acquire Take-Two," said EA corporate communications VP Jeff Brown. "While we have the greatest respect for Take-Two's creative teams and products, we can provide no assurance that any transaction will result."
In a recent interview with the New York Times, Zelnick said he'd be "totally fine" if a deal was not accomplished. "We’re very pleased with value we’ve created and feel very sanguine about the future," Zelnick told the Times, adding, "I’m relaxed because I feel confident."
Shares of Take-Two are up slightly to $24.34 per share as of press time today, though the publisher's stock has consistently traded below EA's asking price since the launch window for Grand Theft Auto IV passed.
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This buy-out, just big business.
Wasn't it both CEOs on the phone that decided on this way out. SEC SCE which ever, how come they needed access to all the company files again. Didn't they give them access to the company once already this year.
The last thing was to keep the company value in check. Question, did PS3 Bioshock release yet?
Thats how much in sales GTA, Bioshock, Civ4.
EA is just the biggest fish. Far from the baddest, and best is only close if they buy everybody else. With no one else in the market they will still only be close. EA has the only Offical soccer game, but its not the best soccer game.
r-take-two-or-not#more-708
The facts are that EA canceled the tender offer because without time to use its industry best publishing arm to get better revenues than take 2 could on its IP this holiday season, T2 stock wasn't worth the price set in the tender offer. This has been reflected in the T2 stock price which has been below the tender offer for months now.
This isn't bully business... its business as usual and in any deal an amicable acquisition with the right terms is always possible.
Lastly, EA may not be the big fish anymore. Blizzy-Vision is pretty big now...