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FTC Greenlights EA Take-Two Merger

FTC Greenlights EA Take-Two Merger

August 20, 2008 | By Leigh Alexander

August 20, 2008 | By Leigh Alexander
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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. "Were very pleased with value weve created and feel very sanguine about the future," Zelnick told the Times, adding, "Im 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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