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Takeover Rumors Drive THQ Share Rally
Takeover Rumors Drive THQ Share Rally
September 23, 2009 | By Leigh Alexander

September 23, 2009 | By Leigh Alexander
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    14 comments
More: Console/PC



THQ shares climbed 13 percent yesterday amid a swirl of Wall Street buzz suggesting the UFC 2009: Undisputed publisher could be the target of a takeover by big media.

According to the Wall Street Journal, rumors pegged Time Warner or Viacom as the most likely to make a grab for THQ. "We do think that both Time Warner and Viacom are interested in the gaming space," ThinkEquity analyst Atul Bagga told the paper.

They're more than interested -- they're already present. Viacom is parent of highly successful Rock Band publisher MTV Games, while Time Warner subsidiary Warner Bros. not only has its own interactive entertainment division, but recently completed its acquisition of Mortal Kombat house Midway.

That buy followed Warner's boost in its significant stake in Tomb Raider creator Eidos, an incremental buy-up that suggested it would try to acquire the publisher, a deal Square Enix ultimately accomplished.

Odds don't favor Time Warner, at least, making another games biz buy so soon after Warner Bros.' closing of the Midway deal, especially given the frequency with which the company pegs its game company acquisition plans as "incremental."

Viacom has long sustained a licensing relationship with THQ primarily via its Nickelodeon properties like SpongeBob Squarepants, but has recently begun boosting MTV Games' development staff internally while testing the waters of self-publishing Nickelodeon games, ahead of that deal's 2010 expiration.

Further, publishers become acquisition targets most often thanks to strong internal intellectual properties -- Mortal Kombat made Midway attractive to Warner Bros. even while it was saddled with millions in debt, for example. Game industry analysts generally agree that the most attractive takeover target in the business is publisher Take-Two, owner of the Grand Theft Auto cash cow, a highly visible slate of development talent -- particularly in Rockstar -- and other desirable franchises like BioShock plus a suite of successful sports games.

THQ, on the other hand, has received criticism from analysts in recent years due in part to its failure to establish a consistently resilient original IP, although thanks to the success of its fighting license titles like UFC, it's begun to see the fruits of recent cost-cutting measures, making an acquisition somewhat more feasible.

Analyst Brian Sozzi told the WSJ that a company like Viacom or Time Warner would pay $12 to $15 per share on the high end for THQ, which was trading at $7.46 as of market close yesterday after the surge.

Neither THQ, Time Warner nor Viacom have been willing to comment on the rumors.

[UPDATE: Later on Wednesday, another rumor reared its head: a possible acquisition of Electronic Arts by Microsoft. The rumor, classified as "unsubstantiated chatter" by an options strategist in a Reuters report, drove EA share prices upward.

One analyst told Reuters, "Our contacts just don't see Microsoft buying Electronic Arts, no synergies whatsoever, and also not Microsoft's corporate primary focus right now."


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Comments


Jeff Ungurean
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But what does "IP" stand for? I must know! (j/k)

Ralph Lee
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Jeff: Internet Protocols.

Mathieu MarquisBolduc
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1-Buy THQ shares. 2-Start rumors about a possible takeover. 3-Sell shares. 4-$$$

Brent Erickson
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Jeff - IP stands for "Intellectual Property" or in other words; a non-physical item with value such as a trademark, patent, copyright, or franchise.

Jeff Ungurean
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Sorry, that was a joke related to Leigh's Twitter post re: WSJ mistaking one IP def for another:)

Jorge Garcia Celorio
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Although THQ has mainly developed licensed games, I would not discard its creative power. So far, Homefront looks like a promising title. I guess that Viacom will ultimately acquire THQ due to their long standing relationship, and the fact that if Viacom really wants to enter the game business, it needs to diversify its assets. So far they have MTV games, but having a creative house for developing new and interesting IP, would represent a bonus. Again, THQ is not a powerhouse (such as Rockstar or 2K Boston), but it is surely an interesting option for Viacom.

Evan Bell
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I see you this rumor and raise you with a Microsoft buying EA rumor:

http://www.reuters.com/article/innovationNewsTechMediaTelco/idUST
RE58M3CV20090923

Tyler Peters
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This is not a complete surprise - many (including myself) have argued that the biggest problem over the last 5-6 years with THQ has been the management. They have floundered numerous licenses and internal IPs, all the time losing market share. From both a marketing standpoint and a developer-management standpoint THQ has let a lot of $ slip through their fingers.

A takeover would be a great opportunity for a better-managed publisher to come in, clean house, and restart some of their library.

Maurício Gomes
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Microsoft buying EA would be bizarre... And dangerous...



It would be like Belzebu buying Baphomet.



Or something like that...

Maurício Gomes
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@David.



The diffrence that Nintendo/Sony divorce created two great consoles dinasties. Sega screwed gamers, and MS buying EA would result in the same (ie: gamers screwed).



We don't need even more monopoly, specially on corporations that do stuff like buy companies only to increase their monopoly (as some people know, Bungie was a MAC developer, now not anymore... and EA bought Renderware and told everyone that Renderware is crappy and they would not sell it, only to EA use it to make Burnout Paradise and The Sims 3, while Rockstar had to invent a new engine from scratch to their games).



This is dead... Yesterday a friend of mine told me that he tought that EA plan in buying everyone was to one day make EA titles exclusive to one console and have total control and monopoly of their stuff, maximizing profit in short term by pricing the way that they want among other things...



Unfortunally I see this rumor now today apearing, and confirming that maybe my friend is not wrong.

Jorge Garcia Celorio
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I don't care, Microsoft get EA. Sony, you would have to buy Take-Two (awesome!!!)....



... everyone's happy then :)

Walter Lippmann
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This isn't a surprise for those of us who keep track of the financial side of games. Even if no deal materializes this time around, one is most definitely on the way in the future.



Whatever.



As long as Relic is preserved in all its "RPG-RTS" greatness, like a delicious truffle that is to remain wrapped as the confectioner around it burns to the ground, than all will be well in the universe.

Kevin Jones
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Classic pump and dump.

There is simply no way Microsoft is buying EA. It simply desn't make sense in any way. Meanwhile, the people who started the rumours have cashed in on their profits when EA shares shot up yesterday, and are probably on their way to some caribbean island with the loot and a hot blond.

A sucker and his money are soon enough parted from each other.

Sigh.

Maurício Gomes
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@Kevin



We never know... Disney bought Marvel, and it made no sense.


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