Following EA's public statement on its interest in purchasing publisher Take-Two, the latter's board of directors has issued a public rejection, saying the unsolicited proposal "substantially undervalues" the company's assets.
"We believe EA's unsolicited offer is highly opportunistic," the Take-Two response reads, "and is attempting to take advantage of our upcoming release of Grand Theft Auto IV, one of the most valuable and durable franchises in the industry."
The board has also said it has rejected the offer because it "values the Company at a significant discount to its public peers and does not compensate Take-Two for its intrinsic value and the substantial synergies that the proposed combination would create."
Chairman Strauss Zelnick commented that "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."
Zelnick did admit that the board had entered into good-faith dialogue with EA to "determine if our companies can reach common ground on the appropriate value of Take-Two as a first step to realizing a mutually beneficially transaction," but says the launch of GTA IV is too important to make any immediate judgments.
Instead, Zelnick said Take-Two has "offered to initiate discussions with EA on April 30th, 2008 (the day after Grand Theft Auto IV is scheduled to release). We believe this offer demonstrated our commitment to pursuing all avenues to maximize stockholder value, while we believe that EA’s refusal to entertain this path is evidence of their desire to acquire Take-Two at a significant discount, whereas we believe this value rightly belongs to our stockholders."
Zelnick has also told EA in a letter that until that time, the publisher will not entertain any further discussions with rival groups hoping to acquire Take-Two. The full text of that response follows:
"February 22, 2008
Thank you for your letter of February 19, 2008. As you know, the Board of Directors (the “Board”) of Take-Two Interactive Software, Inc. (“Take-Two” or the “Company”) carefully considered Electronic Arts Inc.’s (“EA’s”) previous offer of $25 per share and concluded that neither the timing of the proposed acquisition nor the price was consistent with the Board’s objective of maximizing stockholder value. The Board’s rationale for rejecting EA’s prior offer is not altered by your decision to increase that offer by four percent.
I would like to reiterate, in the clearest possible terms, the Board’s conviction that this is not the right time for Take-Two to enter into a negotiation to sell the Company. Our organization is keenly focused on the scheduled April 29th launch of Grand Theft Auto IV, and on maximizing the value of the game to the Company and, in turn, our stockholders. It is the Board’s strongly held view that beginning strategic discussions now would distract our Company and thereby threaten the value of this key franchise.
While I understand that you may disagree with the Board’s reluctance to commence discussions immediately, the Board and I want to assure you that our concerns about timing are genuine. Potential negative financial consequences to Take-Two are significant and we believe outweigh the benefits of commencing discussions at this time. As you know, there is no certainty that EA will actually close on the proposed transaction on mutually agreeable terms, especially since you have proposed a price that we would not accept and have qualified your offer by a diligence request. Moreover, as we have all seen time and again, the process surrounding acquiring a public company from start to finish is complex, uncertain, intrusive and distracting, and we believe it would be especially so to the creative artists at the core of our business and to all those who may be displaced by a transaction.
While the Board is convinced that discussions at this time would be imprudent, we also appreciate the potential benefit of a frank and private dialogue with EA. To that end, the Board would be willing to commit to entering into a good-faith discussion with EA on April 30, 2008 to determine if we can reach common ground on the proper value of the Company and therefore an appropriate, mutually beneficial transaction. This would, of course, be subject to both parties reaching a mutually acceptable confidentiality agreement on customary terms. We are prepared to begin negotiating this confidentiality agreement immediately.
In order to alleviate any concerns you may have about the proposed starting date for these discussions, I would be pleased to meet with you privately as soon as possible to talk on a general basis. In addition our Board would confirm, subject to its fiduciary duties, that from now until April 30, 2008 (the “Quiet Period”), the Company will not pursue negotiations with any other potential strategic partner for a business combination unless we have first contacted you. Further, if the Company receives any bona fide offer to acquire the Company during the Quiet Period that the Board decides to explore, the Company will immediately inform EA and we understand that EA may then act as it sees fit.
I would like to note that if EA chooses to announce publicly the Board’s proposal or announce any offer by EA to acquire the Company during this Quiet Period or if the contents of this letter become publicly available in sum and substance, the Company will consider all of its alternatives, including discussions with other parties, and further we will reserve the right to refuse to provide EA access to information or diligence.
John, I believe I know you well enough to rely on your considering this proposal in the same good faith we have in making it. I look forward to your favorable response.
Executive Chairman of the Board"