EA Extends Deadline For Acquisition Offer As Take Two Management Ducks And Weaves
Electronic Arts has extended its tender offer to acquire rival publisher Take Two by nearly a month, from midnight tonight PST to May 16. EA says it is extending the deadline in order to reply to further requests for information on the deal from the Federal Trade Commission, though the frantic ducking and weaving of Take Two’s board and management might also have something to do with it.
EA originally made the offer for Take Two, worth $2 billion, public back on February 24 ; offering $26 per share in cash, a 64 percent premium on Take Two’s share price. The offer had originally been made to the board of Take Two, who rejected the offer before EA made it public to all shareholders ; with the publisher wishing to close the deal before the release of Grand Theft Auto IV at the end of April, so as to put their marketing weight behind the biggest anticipated game of the year.
Take Two’s board then went into some evasive manouvering to avoid the deal. They pushed back the annual general meeting of shareholders by a week ; only allowed shareholders registered on the books five days before EA’s offer was made public to vote – after about half of Take Two’s shares changed hands in the days proceeding the offer.
The meeting also gave the management team of Strauss Zelnick (brought in after shareholders booted the previous management team, who had presided over some messy disasters) a pay hike ; and divested about 8-percent worth of Take Two’s shares to them. This sees EA’s per share offer drop slightly, though the overall deal is still worth $2 billion.
Now Take Two is refusing to meet with EA until the day after GTA IV is released, hoping that the huge sales of that game – and they will be huge – will give Take Two a stronger bargaining position from which to mount their fight.
EA’s extension of the offer shows that they’re still interested, even if the company won’t be in its hands in time for the release of GTA IV. EA could simply withdraw the offer, watch Take Two’s share price plummet and come back in a few months, but for EA time is of the essence.
The merger between Activision and Blizzard will be complete in June, and the new publishing powerhouse will supplant EA as number one in the video gaming market. EA is seeking to fortify its position by snapping up a middle-to-heavy-weight publisher like Take Two, which will bring franchises beyond GTA into its fold : Bioshock, Civilization and Eldar Scrolls amongst others, as well as the development teams Take Two owns, most notably Rockstar.
This is part of a general realignment in the video game publishing world we’ll be seeing over the coming year. Activision-Blizzard has changed the centre of gravity in the industry, and as well as publishers merging we’re likely to see some hot competition to snap up hot new IPs. It has not passed unnoticed that some of the biggest hits in recent times have been new IPs, such as Bioshock and Guitar Hero, and developing these new franchises will be essential as old ones become stale. It will be a good time to be a burgeoning developer.
Take Two has had a rocky time in the previous few years. Despite having some impressive IPs under its wing after an $80 million acquisition spree in 2005, from GTA through Bioshock and Civilization, it also had a series of management crises and scandals that have cost the company. It has been embroiled in scandals relating to the content of some of its games, including Grand Theft Auto III, which was pulled from shelves in several countries including the U.S. in 2005 after the Hot Coffeegate incident.
During 2007 shareholders ousted five of six board members, including the chief executive, and the former chief executive Ryan Brant pleaded guilty to falsifying business records in 2000 and 2001.
Take Two has recovered from these scandals, and has had many successes in 2007 and will do in 2008, but it is unclear how the company would fare by itself in the new video gaming world order come June and the finalisation of the Acti-Blizzard merger.