Take-Two to present to EA as acquisition plans roll into 2009

Take-Two is due to present to the management board of Electronic Arts shortly, as the FIFA publisher continues to pursue its acquisition of the company behind the Grand Theft Auto phenomenon.

Following telephone discussions between Electronic Arts' John Riccitiello and Take-Two's Strauss Zelnick at the weekend, EA has agreed to let its tender offer for Take-Two expire this evening, and intends to sign a non-disclosure agreement paving the way for Take-Two to present directly to the senior executives at EA.

However, EA CEO Riccitiello does not believe it's possible to complete any acquisition of Take-Two this year.

In a letter to Riccitiello, Zelnick wrote: "The company has made significant strides since EA first expressed interest in the company and this presentation includes material non-public information to which you would not otherwise have access, including information relating to our three year product release schedule and management's financial projections.

"The presentation also includes information about the underlying factors that have driven our strong operational and financial performance. I believe our presentation will enable you to understand better the value of our company to EA."

Zelnick added that he was eager to help EA in its decision-making following months of back and forth between the two publishers - and following Riccitiello's signature on the NDA hopes to schedule the presentation immediately.

In response Riccitiello said that he does not believe any acquisition could be completed before the end of the year – crucially missing the forthcoming Christmas sales season – but the company is keen to sit down with Zelnick and his team to delve deeper into the Take-Two business.

"We no longer believe we can integrate Take-Two ahead of the important holiday season," wrote Riccitiello in response.

"We continue to have great respect for Take-Two's creative teams and products and are hopeful that we can work together to reach a mutually agreed transaction."

SOURCE

Take-Two Interactive Software, Inc.yesterday confirmed that it expects to sign a confidentiality agreement with Electronic Arts allowing EA to enter into Take-Two’s formal process to evaluate strategic alternatives. Take-Two also affirmed that it is continuing its discussions as part of this process to maximize value for stockholders. Take-Two also noted that EA will allow its unsolicited conditional tender offer to acquire all of Take-Two’s outstanding shares to expire at 11:59 p.m., New York City time, today. Strauss Zelnick, Chairman of Take-Two, commented, "We welcome EA into our formal process and look forward to demonstrating to their Board the significant strides made by Take-Two since they last undertook a detailed review of our business in early 2007.

For more information, please visit www.taketwovalue.com.

Electronic Arts Inc. will drop a $2 billion hostile bid to acquire Take-Two Interactive Software Inc. and meet with the smaller video-game maker to review its financial information.

Electronic Arts will let its unsolicited tender offer expire tonight because it wouldn't be able to complete a merger in time to capture holiday sales, Chief Executive Officer John Riccitiello said in a letter today to Take-Two Chairman Strauss Zelnick. Missing the shopping season forces the company to reevaluate its $25.74-a-share bid, he said.

``They're not trying to figure out whether they should raise the bid but whether it's worth $25.74,'' Todd Greenwald, an analyst at Signal Hill Capital Group in Baltimore, said in an interview.

Take-Two, maker of the ``Grand Theft Auto'' games, said separately it would provide information to Electronic Arts to move the talks forward. The company rejected Electronic Arts' offer in February, saying it undervalued the business. Take-Two shares have traded below the offer price since June and fell 4.4 percent, or $1.09, to $23.75 today on the Nasdaq Stock Market.

Staying independent remains an option, Zelnick said today in an interview. ``If anything we feel the company gets stronger and healthier with the passage of time.''

``Grand Theft Auto IV'' had the biggest release in the industry's history, with sales of $500 million in the first week following its April 29 debut. Sales dropped to 132,000 copies in July from 396,000 in June and 1.31 million in May, according to NPD Group Inc., which tracks U.S. retail activity.

Sales Fall-Off

The July decline was one of Electronic Arts' considerations in its decision to allow the tender offer to expire, Jeff Brown, a spokesman for the Redwood City, California-based company, said in an interview.

``Part of the premium was for holiday sales of `Grand Theft Auto,' and that opportunity is getting smaller,'' said Pacific Crest Securities analyst Evan Wilson in Portland.

The decline wasn't surprising after the game's record start, Zelnick said. Sales will pick up during the holiday season and as console manufacturers reduce prices, he said.

```Grand Theft Auto' sold more than anyone expected, except perhaps me,'' Zelnick said. ``I still think we're going to continue to sell more.''

Greenwald rates Electronic Arts shares `hold' and doesn't own any. He doesn't have a rating on Take-Two. Wilson rates both stocks ``sector perform'' and doesn't own either.

Take-Two shares have gained 29 percent this year. Electronic Arts, down 18 percent this year, fell 48 cents to $47.76.

`Act Quickly'

``Our board remains unwavering in its belief that EA's unsolicited conditional tender offer of $25.74 per share was inadequate,'' Take-Two said in the statement today. The company will demonstrate ``significant strides'' made since Electronic Arts last reviewed the business in early 2007, Take-Two said.

Electronic Arts, which lost its status as the world's largest video-game maker with the creation of Activision Blizzard Inc. in July, doesn't plan to raise its bid, Brown said.

``We have been price disciplined throughout this process and we will continue to be price disciplined,'' Brown said.

Take-Two will give Electronic Arts information including a three-year product-release schedule and financial estimates, Zelnick said in a letter to Riccitiello. The company will ``act quickly,'' he said.

Antitrust Review

The Federal Trade Commission is scheduled to complete an antitrust review of the proposed offer this week, Electronic Arts said today. The company had previously extended its tender offer five times to let regulators complete their work.

Zelnick said last month the company was reviewing options related to the offer, ``chief among them to remain independent.'' The company in June reported its first quarterly profit in more than two years, helped by ``Grand Theft Auto IV.''

Other Take-Two games include the science-fiction title ``BioShock'' and the ``Sid Meier's Civilization'' series.

SOURCE

Like a corporate ninja, Electronic Arts has hurled a flash bomb and vanished into the shadows with Take-Two Interactive bundled under its cloak.

Umm. Do Ninjas wear cloaks? Perhaps the metaphor breaks down a bit at that point.

No matter - the point is that EA has entered into a confidentiality agreement with Take-Two and both parties are now obliged to keep their lips tightly zipped with regard to the companies ongoing discussions.

Following the FTC's announcement last week that they would not oppose any merger, EA decided not to renew the formal bid and has been having some cosy chats with its new friends at Take-Two.