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Electronic Arts, Take-Two Break It Off, But Not For Long
Posted by Brian Crecente at 1:00 AM on August 19, 2008
After months of wooing, of angry words and bitter arguments, Electronic Arts and Take-Two have finally decided to break it off and by break it off I mean that EA isn't going to reup their offer to buy Take-Two.... again. But wait, not so quick. Don't think for a second that means that the the two companies aren't still going to go at it in the break room when no ones around.
EA says they've decided to let their latest offer to buy up Take-Two lock stock and, well stock at $US 25.74 a share expire at midnight tonight, but only because they don't think they would have the time anymore to dress up their new acquisition and parade her around for the holidays. In exchange, Take-Two is promising to stop by Electronic Arts one of these days and show EA just how super awesome they are, but only if they don't tell anyone.
I expect one of them to get totally drunk come Christmas and spill all of the beans over a ham dinner.
EA Negotiating NDA to Obtain Limited Due Diligence Tender Offer to Expire Monday, August 18, 2008, on its Terms
REDWOOD CITY, Calif.—(BUSINESS WIRE)—Aug. 18, 2008—Electronic Arts Inc. ("EA") (NASDAQ:ERTS) today issued an update on its offer to acquire Take-Two Interactive Software Inc. ("Take-Two") (NASDAQ:TTWO).
On Friday August 15, John Riccitiello, Chief Executive Officer of EA, called Strauss Zelnick, Executive Chairman of the Board of Directors of Take-Two, to discuss EA's offer to acquire Take-Two. Following discussions over the weekend between EA and Take-Two, EA accepted Take-Two's offer to provide a management presentation to EA containing non-public information. The letters between the parties are set forth below.
EA also announced that it will allow its tender offer for all of the currently outstanding shares of common stock (including the associated preferred stock purchase rights) of Take-Two to expire on Monday, August 18, 2008 at 11:59 p.m., New York City time.
As previously reported, the Federal Trade Commission is scheduled to complete its antitrust review of the proposed transaction by August 21. EA remains confident that antitrust issues will not prevent or delay a transaction.
Below is the text of the letter sent today by Mr. Riccitiello to Mr. Zelnick:
August 18, 2008
Mr. Strauss Zelnick
Executive Chairman of the Board of Directors
Take-Two Interactive Software, Inc.
622 Broadway
New York, NY 10012
Dear Strauss:
Thank you for taking my call on Friday and for your response letter
on August 17, 2008.
As discussed on Friday, given the passage of time, we have to
validate the assumptions used in the model to support our offer
price of $25.74 per share in cash. In addition, we no longer believe
we can integrate Take-Two ahead of the important holiday season.
Accordingly, we require due diligence to support a transaction and
are therefore letting the tender offer expire tonight. However, we
are pleased to accept your offer to review your management
presentation as outlined in your letter.
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.
Sincerely,
/s/ John Riccitiello
John Riccitiello
Chief Executive Officer
Below is the text of the letter sent yesterday by Mr. Zelnick to Mr. Riccitiello:
August 17, 2008
Mr. John S. Riccitiello
Chief Executive Officer
Electronic Arts Inc.
209 Redwood Shores Parkway
Redwood City, CA 94065
Dear John:
Thank you for your recent expression of interest for Electronic Arts
Inc. ("EA") to participate in Take-Two Interactive Software, Inc.'s
(the "Company") formal process to evaluate the Company's strategic
alternatives. As you know, we have been willing to have EA
participate in this process following the successful launch of GTA
IV, and we are happy to include EA now.
As I mentioned when we spoke on Friday, our process begins with an
in-depth management presentation. 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.
Prior to the management presentation, we will only require EA to
enter into a confidentiality agreement. The agreement would be
limited to provisions required to comply with federal securities
laws and to ensure the Company's ability to protect the
confidentiality of the information shared with you. I can assure you
that this requirement is the same as or more favourable to EA than
that which we have employed with all other participants in the
process.
We understand that a number of months have passed since you first
expressed interest in the Company and, accordingly, we will act
quickly to assist you in moving through our process. Once we execute
a confidentiality agreement, we are prepared to schedule the
management presentation immediately.
With my best personal regards.
Sincerely,
/s/ Strauss Zelnick
Strauss Zelnick
Executive Chairman of the Board
EA's tender offer for all of the currently outstanding shares of common stock (including the associated preferred stock purchase rights) of Take-Two Interactive Software Inc. ("Take-Two") (NASDAQ:TTWO) will expire at 11:59 p.m., New York City time, on August 18, 2008.
Morgan Stanley & Co. Incorporated is acting as the Dealer Manager for the tender offer, Simpson Thacher & Bartlett LLP and Latham & Watkins are acting as legal counsel, and Georgeson Inc. is acting as Information Agent for the tender offer.
About Electronic Arts
Electronic Arts Inc. (EA), headquartered in Redwood City, California, is the world's leading interactive entertainment software company.
Founded in 1982, the Company develops, publishes, and distributes interactive software worldwide for video game systems, personal computers, cellular handsets and the Internet. Electronic Arts markets its products under four brand names: EA SPORTS(TM), EA(TM), EA SPORTS Freestyle(TM) and POGO(TM). In fiscal 2008, EA posted GAAP net revenue of $3.67 billion and had 27 titles that sold more than one million copies. EA's homepage and online game site is www.ea.com. More information about EA's products and full text of press releases can be found on the Internet at http://info.ea.com.
Additional Information and Where to Find It
This press release is neither an offer to purchase nor a solicitation of an offer to sell securities of Take-Two. The offer to purchase or solicitation of offers to sell is being made pursuant to a Tender Offer Statement on Schedule TO (including the Offer to Purchase, Letter of Transmittal and other related offer documents) filed by EA and EA08 Acquisition Corp. with the Securities and Exchange Commission, or SEC, on March 13, 2008. Before making any decision with respect to the offer, Take-Two stockholders are advised to read these documents, as they may be amended or supplemented from time to time, and any other documents relating to the tender offer that are filed with the SEC carefully and in their entirety because they contain important information, including the terms and conditions of the offer. These documents may be obtained at no charge by directing a request by mail to Georgeson, Inc., 199 Water Street, 26th Floor, New York, NY 10038, or by calling toll-free at (800) 213-0473, and may also be obtained at no charge at the website maintained by the SEC at http://www.sec.gov.
Forward Looking Statements
Some statements set forth in this communication, including those regarding EA's offer to acquire Take-Two and the expected impact of the acquisition on EA's strategic and operational plans and financial results, contain forward-looking statements that are subject to change. Statements including words such as "anticipate", "believe", "estimate" or "expect" and statements in the future tense are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual events or actual future results to differ materially from the expectations set forth in the forward-looking statements. Some of the factors which could cause results to differ materially from the expectations expressed in these forward-looking statements include the following: the possibility that EA's offer to acquire Take-Two will not be consummated; the possibility that, even if EA's offer is consummated, the transaction will not close or that the closing may be delayed; the effect of the announcement of the offer on EA's and Take-Two's strategic relationships, operating results and business generally, including the ability to retain key employees; EA's ability to successfully integrate Take-Two's operations and employees; general economic conditions; and other factors described in EA's SEC filings (including EA's Annual Report on Form 10-K for the year ended March 31, 2008). If any of these risks or uncertainties materializes, the offer may not be consummated, the acquisition may not be consummated, the potential benefits of the acquisition may not be realised, EA's and/or Take-Two's operating results and financial performance could suffer, and actual results could differ materially from the expectations described in these forward-looking statements.
All information in this communication is as of the initial date on which this communication was released. EA undertakes no duty to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.
Comments (AU Comments · US Comments)
There are currently no AU comments for this post.
HeyMykie
Posted 1:29 AM 19/8/08
This is quite possibly the longest session of four-play we've experienced...
HeyMykie
Struct09
Posted 1:28 AM 19/8/08
@Struct09: Oops, leter = letter. I hate spelling mistakes :(
Struct09
Struct09
Posted 1:27 AM 19/8/08
Seeing as this is an EA article on Kotaku, there will obviously be a lot of people here who don't understand the business behind this deal, and won't even read the article.
Take Two would like to be purchased, the only reason they have "fought off" EA is that they want more money. If it wasn't obvious before, Zelnick says this in the leter (I recommend reading it, it's quite interesting):
"As you know, we have been willing to have EA participate in this process following the successful launch of GTA IV, and we are happy to include EA now. As I mentioned when we spoke on Friday, our process begins with an in-depth management presentation.
...
"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."
I am surprised that Take Two didn't take EA's previous offer, and I'm definitely interested to see what happens to their stock tomorrow.
Struct09
beta_angel
Posted 1:24 AM 19/8/08
So...to summarize:
EA: Hey, we'll buy you.
TT: Yeah? How much?
EA: What your stock was worth 3 months ago.
TT: LOLZ!
EA: What? :(
TT: More.
EA: More what?
TT: Dolla Dolla Billz, y'all? We wants to get PAID!
EA: NO! Jerks.
TT: :( What if I give you a slide show to explain how kick-ass we are?
EA: K.
TT: Here, sign this so you can't tell anybody how kick-ass we are.
That just about covers it, yeah?
beta_angel
Neo-Senku: The World's Finest Pervert
Posted 1:22 AM 19/8/08
EA is like having sex with Kobe Bryant, you can fight and struggle but eventually its gonna happen. lol.
Neo-Senku: The World's Finest Pervert
BigDragon
Posted 1:11 AM 19/8/08
EA does not take No for an answer.
With Take Two's GTA success and GTA sequels, DLC, and additional content on the way, I can't see why they would want to be sold right now. They have such a bright future ahead of themselves.
BigDragon
hotdamn
Posted 1:10 AM 19/8/08
remember when Leigh used to write these? good times.
hotdamn
vig0r
Posted 1:08 AM 19/8/08
i read nothing but your part of the article but im not suprised that take two wouldnt back down,they have the dlc coming out soon and they also are now making the new versions of gta iv,you know san andreas and vice city style.+the pc version gta iv.taketwo can only get better.
vig0r
CHU BOI
Posted 1:07 AM 19/8/08
@LittleBigPlaneteer: lol.
CHU BOI
CHU BOI
Posted 1:07 AM 19/8/08
You could just look at the picture and get the full gist of the post. Great choice of post picture, Brian.
CHU BOI
LittleBigPlaneteer
Posted 1:06 AM 19/8/08
It's like being friends with a couple who keep breaking up, then getting back together. It's annoying as hell, and frankly I stopped giving a shit. JUST MAKE UP YOUR MINDS ALREADY YOU CONGLOMERATE BASTARDS!
LittleBigPlaneteer
AngryEddy
Posted 1:06 AM 19/8/08
Somehow I managed to forget all about this. I suspect that's EA's devilish plan. Wait for everyone to be calm, to strike when take-Two least expects it. Like a cobra. First, Fast, and Showing No Mercy...
AngryEddy
DragonSix
Posted 1:54 AM 19/8/08
@beta_angel:
Thanks a lot for the summary.
DragonSix
mva5580
Posted 1:45 AM 19/8/08
Just get it over with already. It's obviously going to happen, just finish it for crying out loud.
So instead of having multipe Kotaku articles with about ~100 comments each, we can just have one big one with about 400 for the article that actually confirms it's happened. That one should be, uh, "interesting."
mva5580
Altersparck
Posted 1:44 AM 19/8/08
2K is a subsidiary of Take-Two, isn't it? If so, then wouldn't that mean a reunion between 2K Boston/2KAustralia (aka Irrational) and with the System Shock IP..?
Altersparck
ThursdayNext
Posted 1:34 AM 19/8/08
@HeyMykie: "foreplay" because it happens be"fore" the main event. Not as in there are four participants...sheesh.
ThursdayNext
Omegasoap
Posted 1:31 AM 19/8/08
yesssssssss
Omegasoap
SevenD
Posted 2:19 AM 19/8/08
Sega's suprise game will be world series baseball 2k9
SevenD
twinturbo2
Posted 2:05 AM 19/8/08
EA can keep their hands off of Midnight Club. If they do buy Take 2 and kill Midnight Club in favor of running Need for Speed into the ground, I'll. Be. Pissed.
twinturbo2
Quilt
Posted 2:32 AM 19/8/08
I'll say what a friend of mine says to me when I'm persuing a girl and fail:
"Did you ask her out?"
Yup, it didn't work.
"Did you bring her flowers?"
Yup, it didn't work.
"Did you take an interest in her hobbies?"
Yup, it didn't work.
"Did you tell her how you felt?"
Yup, she laughed.
"Did you try holding her down?"
Yu...wait, what?
Quilt
somarix
Posted 2:22 AM 19/8/08
EA will eventually buy TT for a lot of dough, TT will be quite happy, they'll release Duke Nukem Forever, and it'll suck. So, they'll come back to making GTA5.
Right?
somarix
art_zombie
Posted 3:09 AM 19/8/08
I think we all learned something important today; Take-Two does not put out on the first date, much less move in with you the next day.
art_zombie
Dajmin
Posted 3:04 AM 19/8/08
Sadly I've thought from the start that this deal is inevitable, and the longer both EA and T2 play it out, the more likely it becomes. So you can kiss goodbye to any US sports franchise competition in favour of EA Sports forever.
ActiBlizzard, THQ or even Ubisoft would be a far better choice as far as we gamers are concerned. But they simply don't have the financial power that EA does.
Of course the best solution would be for T2 to remain independent. They have dozens of successful titles and they get consistently high ratings off everyone. Why hand all your profit over to someone else when you can keep it to yourself? Surely the TakeTwo name must have legs of it's own after all this time; they can't NEED EA as much as EA wants them.
Dajmin
GnatB
Posted 2:58 AM 19/8/08
@beta_angel:
Not really. IIRC at the time EA issued the offer it was for like $8 MORE than their stock was worth... They declined and EA took the offer public, which immediately resulted (obviously) in the stock rising to right around EA's offer price. (Since, obviously, there was somebody buying at that price, the stock rose to that price. Generally speaking, at that point raising your bid further would be sorta silly, as you'd only be bidding against yourself.)
Now that their isn't somebody offering at that price, we get to see if the stock goes back down to the pre EA offer price, (meaning it really was just artificially inflated by EA's offer as most analysts seemed to indicate) or if it really is worth that much now.
GnatB
segamanxero
Posted 2:55 AM 19/8/08
@beta_angel: this comment must be nominated!!!
segamanxero
Xtreme_Hindu_Cow
Posted 2:51 AM 19/8/08
this is BS. TAke-two should have the confidence of a major company. instead they are selling at a high price. When gas is so high people spend time at home. some of us play games in our spare time. Take-two shouldn't worry about losing money they have already made a name for themselves in this industry. Have the ballz to take it all the way.
Xtreme_Hindu_Cow
Oban
Posted 3:52 AM 19/8/08
EA needs to do this so they can get at least ONE title that is not the Canned Madden IP with a metacritic score of 85 or higher. Stock goes down down down CFO goes mew mew mew
Oban
Does Not Equal (ダズノット)
Posted 3:36 AM 19/8/08
Thank freaking god. I was sick of EA setting a deadline and then endlessly extending it. By the fact that nothing had happened at all lately, I'm guessing all concerned were sick of it as well.
Does Not Equal (ダズノット)
everybest
Posted 4:13 AM 19/8/08
Offer expires midnight New York City time!
everybest
NeVeRMoRe666
Posted 4:02 AM 19/8/08
I'm not as concerned about this merger as I was about say, 3 months ago. EA seems to be moving in a more positive, hands off direction. We've seen some quality titles in Battlefeild: Bad Company, Madden '09 and we've also seen some pretty awesome upcoming team-ups with EA (Suda51, Epic) to arrive in the near future. Of course, EA's big bad reputation always seems to precede it.
Maybe Take 2 should take him back. Maybe they can work things out. Then again, maybe I'm wrong and I'll have to deal with the guilt for the rest of my life when I turn on the nightly news to find Take 2 murdered after EA came home drunk yet again...
NeVeRMoRe666
kasplat
Posted 4:49 AM 19/8/08
EA has always had it in their business plan to be the biggest, so if they don't get Take Two they have to find something else or they might lose some of their bargaining power. Imagine losing the NFL and other sport exclusives... Then again, maybe this is the start of the downward slide for EA since they bet wrong on the PS3 and 360 and missed the Wii boat.
kasplat
Ashkihyena
Posted 4:37 AM 19/8/08
@Dajmin: ActiBlizzard sucks for what they've done. EA sucks for running things into the ground and making whores out of the franchises, so no, neither one of them plz.
Take-Two should just remain separate and keep doing what they're doing cause they're good at it.
Ashkihyena
TheFight
Posted 6:22 AM 19/8/08
@kasplat: i think your close to whats going on.
i hate ea. have hated it since the nfl license madness. the only way that any of this mass buying and hostile takeover stuff makes sense is if they develop their own console. they are too big of a company to ignore that possibility. their brand recognition was their only concern and their actions as of recent have gone to improve that. even their new hires (hello mr. moore) and the development of nucleus all look like baby steps moving towards that goal...imagine their first party software lineup. sega and t2 put a legitimate scare under their asses when their 2k sports line up was all $20 and since then, ea has gone thru their wallet to solve all their issues... all thats going to happen in the long run is more rushed sequels and bad wii ports of popular franchises.
TheFight
fenderfuel08
Posted 8:05 AM 19/8/08
@kasplat: Not betting on the Wii has nothing to do with it, EA games on the 360 and PS3 have generally been consistently average in quality(in my opinion), and they milk their sports games way too much.
fenderfuel08
wild homes loves you but chooses darkness!
Posted 8:02 AM 19/8/08
@TheFight: That's just rubbish. EA cannot afford to create a console. They have no hardware experience-- and more importantly, they lack the name recognition to sell a system. I don't know where you get your fabulist take, but if Microsoft's brand name isn't big enough to make the XBOX project a lifetime fiscal success after seven years, the Electronic Arts name won't get it done in twenty-five. But finally, there's the problem of money. Presumably you mean that EA games would only be playable on the EA console, which would be the singular draw for the console-- but in order for this to make sense fiscally, you'd need your fledgling console to have an install base larger than the current install base of all the systems your games currently appear on... which is a figure of, given the current sales of the PS3, Wii, and 360, about 55,000,000 units. Anything less than that very large number, and you'd actually be sacrificing sales by reducing your potential audience. This isn't to mention that consoles are money-losing propositions, by and large...
Actually, your argument is so ridiculously conspiracy theorist that I give up.
wild homes loves you but chooses darkness!
fenderfuel08
Posted 7:59 AM 19/8/08
Take 2 doesn't need to be bought, they make better games than EA and they make some of the best games in the industry. I could never understand why Take 2 was up for sale in the first place when they were making so much money off of Bioshock and GTAIV.
fenderfuel08
GnatB
Posted 7:56 AM 19/8/08
Hmm.. and TTWO has dropped to $23.75
$2.00 below EA's offer.
Be sorta funny (to me, since I don't care a whit about stupid sports titles, that people expect to innovate even when the games they immitate haven't changed either) if EA turned around and offered $24 per share (or less).
GnatB
wild homes loves you but chooses darkness!
Posted 7:47 AM 19/8/08
@kasplat: EA have, in the past year, signed partnership deals with Valve, BioWare, Pandemic, Grasshopper, and Epic. Their fall 08 schedule includes Left 4 Dead, Mercenaries 2, Mirror Edge, Spore, and Rock Band 2. And that's outside of the typical yearly franchise installments. This is not a publisher hurting at all. They backed out of this deal because, frankly, their initial valuation of TTWO is now too high. Even with the boosts from both the EA offer and GTA IV, TTWO hasn't consistently performed much higher than EA's offer, and currently it's about about a two dollar disparity between the stock price and the offer sheet. With nothing truly substantial on the radar, there's no reason to believe TTWO will surge any time soon.
wild homes loves you but chooses darkness!
kemicon
Posted 8:10 AM 19/8/08
And much fanfare was had throughout the land.
kemicon