EA is attempting to buy Take-Two

Discussion in 'Misc. and Multiplatform Games' started by hippie_hunter, Feb 24, 2008.

  1. hippie_hunter The King is Back!

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    Electronic Arts today announced that it has proposed to acquire Take-Two in an all-cash deal valued at approximately $2.0 billion.
    By Colin Campbell

    The news follows weeks of rumors that Take-Two would be the subject of an acquisition bid, with Viacom touted as a possible suitor at $1.5 billion. EA has, it turns out, attempted to buy Take-Two for $25 a share, and, after being rebuffed, has upped the ante by a buck. But the firm has warned shareholders that they won't get a better price.

    EA's proposal of $26 per share in cash represents a premium of 64 percent over Take-Two's closing stock price prior to the company's bid.

    EA Chief Executive Officer John Riccitiello said "Our all-cash proposal is a unique opportunity for Take-Two shareholders to realize immediate value at a substantial premium, while creating long-term value for EA shareholders. Take-Two's game designers would also benefit from EA's financial resources, stable, game-focused management team, and strong global publishing capabilities."

    He urged Take-Two shareholders to accept the bid, "There can be no certainty that in the future EA or any other buyer would pay the same high premium we are offering today."

    EA had warned Take-Two's bosses that if they refused to engage in negotiations, the company would go public with its bid. Today, EA made good on that threat.

    Take-Two's assets include Grand Theft Auto 4, which ought to be the biggest game of 2008. EA says it wants to get the deal done before the game's release in order to avoid disruption.


    The full text of EA's letter to Take-Two follows:

    February 19, 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 your letter of February 15, 2008. While I appreciate its courteous tone and value our ongoing dialogue, I am disappointed that you have rejected Electronic Arts Inc.'s ("EA's") $25 per share cash offer to acquire Take-Two Interactive Software, Inc. ("Take-Two") and declined to engage in the friendly negotiations we proposed. We continue to believe that an acquisition of Take-Two by EA is in the best interests of your shareholders, employees and other constituents, and we remain interested in acquiring Take-Two. So, to further demonstrate our seriousness and encourage you to move forward now, I am writing to increase EA's offer to acquire all of the outstanding shares of Take-Two to $26 per share in cash. This offer is subject to Take-Two agreeing by February 22, 2008 to commence negotiation of a definitive merger agreement and to permit EA to commence a limited due diligence review of Take-Two.

    Our revised all-cash offer represents a 64% premium over Take-Two's most recent closing price and a 63% premium over Take-Two's 30-day trailing average price (based on prices as of market close on Friday, February 15th). We believe our offer represents a unique and compelling opportunity for Take-Two shareholders to maximize the value of their investment in the company, with materially lower risk than if Take-Two proceeds on a stand-alone basis.

    We also believe that the transaction we are proposing represents a uniquely attractive opportunity for Take-Two's creative teams and key employees. EA is a diversified leader with well-established franchises and proven intellectual properties, global reach, and significant financial resources. I know we both agree that Take-Two's talented creative teams deserve a permanent home within a stable and growing publisher that provides these teams an environment to do what they do best - create great games. EA is organized in a four-label model that provides our creative teams the autonomy they need to fully realize their creative ambitions, while also providing a stable and supportive corporate and publishing infrastructure which allows them to best address the global marketplace. We have the resources to make the significant investments in technology and infrastructure needed for the most creative and innovative games in the industry. In short, a combination with EA would provide Take-Two's studios and employees a combination of the right resources for investment and global reach, and the right environment to do their best work.

    We believe that Take-Two's shareholders would not be well-served by any further delay in negotiating and completing the proposed merger. While the videogame industry remains an attractive, high-growth business, the challenges and risks in the business are escalating, and the need for scale is becoming more pronounced. Despite steps taken since March 2007, Take-Two remains dependent on a limited number of titles, and has limited capital resources. In addition, Take-Two faces ongoing financial, legal and operating issues and a very intense competitive environment. Given these factors, we believe it will be increasingly difficult for Take-Two to create sustainable shareholder value and that Take-Two remains exposed to considerable risk of value loss.

    We also believe that any delay in this proposed transaction works against the interest of Take-Two's shareholders, because:

    -- There can be no certainty that in the future EA or any other buyer would pay the same high premium we are offering today. We place significant value on the ability to close the transaction relatively quickly so that EA's strong publishing and distribution network, including our global packaged goods, online and wireless publishing organizations, can positively impact the catalogue sales of GTA IV and also the launch and sale of titles released later this year. We want to work with you and your team to complete the transaction in time to begin realizing its significant marketplace benefits in advance of this year's holiday selling season.

    -- We believe Take-Two's current share price already reflects investor expectations for a strong release of GTA IV as well as the longer-term issues that Take-Two faces. Once GTA IV ships, Take-Two will again be dependent on less-popular titles and face increasing challenges to compete with larger and better-capitalized competitors.

    -- With GTA IV shipping on April 29, development on this important title must now be essentially complete. We believe now is the right time to complete a transaction with minimal disruption for Take-Two.

    We also believe the transaction we are proposing will create value for EA's shareholders. In addition to the top-line benefits noted above, we can achieve bottom-line benefits by combining Take-Two's and EA's corporate and publishing infrastructures and by optimally supporting Take-Two's creative teams and intellectual properties in EA's decentralized label structure.

    Considerable thought, time and resources have been put forth in developing this offer, and our Board of Directors unanimously supports it. Our offer is not conditioned on any financing requirement. It is subject to the satisfactory completion of a due diligence review of Take-Two, the negotiation and execution of mutually acceptable definitive transaction agreements, and the satisfaction of customary conditions to be set forth in such agreements. We are prepared to move forward immediately with formal due diligence and the negotiation and execution of a definitive merger agreement and believe that with adequate access to the necessary information and people, we can complete both in approximately two weeks. We believe that our due diligence review can be completed with minimal disruption, requiring only limited access to a small number of senior executives of Take-Two and its legal, accounting and financial advisors. We also have prepared a draft merger agreement that we can forward to you immediately.

    Our strong preference is to conduct a private negotiation. If you are unwilling to proceed on that basis, however, we may pursue other means, including the public disclosure of this letter, to bring our offer and the compelling value it represents to the attention of Take-Two's shareholders.

    I am available to meet and discuss any and all aspects of this proposal with you and your Board. Again, we believe this proposal represents a unique opportunity to maximize value for Take-Two's shareholders, and that the combined enterprise would be extraordinarily well positioned to build value for our respective customers, employees, developers and other business partners. We hope that you and your Board share our enthusiasm, and we look forward to hearing back from you by February 22.

    http://www.next-gen.biz/index.php?option=com_content&task=view&id=9285&Itemid=2
     
  2. Havok83 Registered

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    Good lord, I HOPE this does not happen
     
  3. StrainedEyes All the way up it!

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    Take Two be stronger than that!
     
  4. hippie_hunter The King is Back!

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    Actually EA is getting better lately and if they get the 2K Sports developers under their wing, maybe we can get some better sports games from EA Sports.
     
  5. JohnRico Registered

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    I guess we will get an update this week ? If Take-Two had to respond by the 22nd
     
  6. hippie_hunter The King is Back!

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    Plus having Irrational and Firaxis under their internal team of developers, it would make EA's line of internal developers look even better (which also has been improving due to their acquisitions of Criterion, DICE, Pandemic, and Bioware).
     
  7. hippie_hunter The King is Back!

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    I think Take-Two already rejected it (it's the 24th now) and EA is now taking this offer up to the shareholders of Take-Two.
     
  8. Fran Banned User

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    I hope it happens simply so they can improve Madden, although it is pretty good at the moment.

    They need to improve NBA Live greatly, and BRING BACK MVP BASEBALL (for major leagues).
     
  9. JohnRico Registered

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  10. JohnRico Registered

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    Why does EA want to acquire Take-Two?
    We have enormous respect for the creative teams at Take-Two. We think we can provide those teams with a stable creative environment, a strong publishing partner with a global and more comprehensive publishing platform that includes packaged goods, online and wireless, capital to invest in the growth of existing and new game franchises, and a team of executives that know the game industry well. Most of all, we can offer them the creative freedom to do what they do best – make great games.

    Why now?
    We’ve waited to ensure that our proposal did not disrupt development on GTA IV. The game is scheduled to launch in about two months, which means the core development should be essentially complete.

    At the same time, the reorganization of the EA Labels is basically done and our newest studios – BioWare and Pandemic – are settling in. Under the reorganization, creative teams at EA have a new sense of freedom and responsibility. There are more brand-new titles in development today than at any time in our history.

    Finally, this is a good time to align our publishing strengths to Take-Two’s game roster. A timely integration would give a big boost to Take-Two’s games that are scheduled for release later this year and for their entire catalog leading into the holidays.

    How long has EA been planning to bid on Take-Two?
    We have been looking at Take-Two for some time and have been in communication with them on-and-off for about a year. We opened a dialogue to discuss our intention to acquire Take-Two with the company’s management in December and followed up with a formal proposal on February 6th. We made a second proposal on February 19th.

    Is this a hostile proposal?
    Our proposal is friendly to Take-Two shareholders, developers, partners, and customers. We continue to seek a friendly, negotiated transaction.

    Would Take-Two retain its organizational identity?
    Take-Two is an organization made up of several extraordinary creative teams at R*, Visual Concepts, Irrational, Firaxis, etc. We’d expect each studio to retain its own unique identity.

    Would the R* team be happy at EA?
    We think so. We have great respect for the R* leadership team and some of our executives have worked with R* leaders while in previous positions with other companies. We believe EA’s decentralized label organization will be attractive to Take-Two’s creative talent.

    With an even larger organization, how will you ensure the quality of the games or implement the improvements that you’ve discussed recently?
    We have a very strong team and the human and financial resources to get the job done. Last year, we implemented a decentralized label organization that allows game development teams a lot of creative freedom and responsibility.

    Will this interfere with the integration of BioWare and Pandemic?
    No. The BioWare and Pandemic teams are working well within EA. It’s still too early to call the transition complete but these creative leaders enjoy a great deal of respect and freedom within the EA system.

    Where would Take-Two roll up within EA’s new label structure?
    It’s too early to discuss plans for managing and integrating the Take-Two team. What we can say is that EA’s new decentralized structure and Label-based model can give these teams the freedom and responsibility they need to continue making great games.

    Do you expect to terminate any Take-Two employees?
    We’re not going to begin managing a company until our proposal is accepted and the deal is done. However we have enormous respect for the creative teams at Take-Two and consider their talent to be one of the most attractive elements of this company. We really want to work with these teams.

    Do you intend to kill or restrict any of the R* franchises?
    We strongly believe that behind all the controversy is a core of great intellectual property and development talent. These titles don’t sell millions because they’re controversial; they sell because they’re great games. We have no plans to change that.

    Would you kill 2K Sports?
    Any integration starts with our respect for the teams and people that make great games. Beyond that, it’s too early to discuss plans for managing Take-Two.

    Would you close Take-Two publishing?
    Again, it’s too early to discuss plans for managing Take-Two.

    Would you keep Take-Two’s New York headquarters?
    R* is based in New York and we have no plans to change that.

    What is EA going to do next?
    EA has gone through a lot of dynamic change in the past year. The company is full of talented people with plans for making great games. We’re incredibly proud of our creative teams and many blockbuster franchises from EA SPORTS to EA Games, The Sims and EA Casual Entertainment. We’re excited about the recent release of Burnout Paradise and looking forward to the upcoming launch of Army of Two, Warhammer Online, Mercenaries2, Dead Space, Boom Blox, Spore and many more.

    * * *

    Additional Information and Where to Find It

    This communication is for informational purposes only and does not constitute an offer to buy any securities or a solicitation of any vote or approval or a solicitation of an offer to sell any securities. This material is not a substitute for the proxy statement Take-Two would file with the SEC if an agreement between EA and Take-Two is reached or any other documents which EA may file with the SEC and send to Take-Two stockholders in connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS OF TAKE-TWO ARE URGED TO READ ANY SUCH DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.

    Investors and security holders will be able to obtain free copies of any documents filed with the SEC through the web site maintained by the SEC at http://www.sec.gov. Free copies of any documents filed by EA with the SEC can also be obtained by directing a request to EA, 209 Redwood Shores Parkway, Redwood City, CA 94065, telephone: (650) 628-1500.

    EA and its directors and executive officers and other persons may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding EA’s directors and executive officers is available in its Annual Report on Form 10-K for the year ended March 31, 2007, which was filed with the SEC on May 30, 2007, its proxy statement for its 2007 annual meeting of shareholders, which was filed with the SEC on June 20, 2007, and Forms 8-K, which were filed with the SEC on June 6, 2007 and July 17, 2007. Other information regarding the participants in a proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in any proxy statement filed in connection with the proposed transaction.

    Forward Looking Statements

    Some statements set forth in this press release, including those regarding EA’s proposal 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 proposal to acquire Take-Two will be rejected by Take-Two’s board of directors or shareholders; the possibility that, even if EA’s proposal is accepted, the transaction will not close or that the closing may be delayed; the effect of the announcement of the proposal 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, 2007 and Quarterly Report on Form 10-Q for the quarter ended December 31, 2007). If any of these risks or uncertainties materializes, the proposal may not be accepted, the acquisition may not be consummated, the potential benefits of the acquisition may not be realized, 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 press release is as of February 24, 2008. EA undertakes no duty to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

    http://www.eatake2.com/faq.htm
     
  11. Timstuff Registered

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    If EA bought Take Two, all it would take would be an EA / Activision merger, and the entire north American game market would be controlled by a single company. Scary stuff.
     
  12. JohnRico Registered

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    Then Electronics Arts would be able to make their own Console & then put Sony & Microsoft out of the Video Game business
     
  13. hippie_hunter The King is Back!

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    I don't think that it's that bad. I think that the Western video game industry is going to end up looking like the Japanese video game industry business wise.

    They'll buy up the important developers (like we've seen with EA buying Pandemic and Bioware, and Activision buying Bizarre), we'll probably see more mergers (such as EA/Take-Two, Activision/Vivendi), and most games will probably be done internally instead of a developer making the game and another company publishing it.

    Much like how Namco-Bandai, Square-Enix, Sega, Capcom, and Konami control the Japanese third party market, Electronic Arts, UbiSoft, Activision Blizzard, and THQ will control the North American third party market.

    Plus EA has been treating its developers much better. They've allowed Maxis, Bioware, Pandemic, DICE, and Criteron to have their own identities, and from the sounds of it, they'll be doing the same with Firaxis, Visual Concepts, and Irrational (hopefully they'll get rid of that stupid 2K Boston/2K Australia name and bring it back to its original name).

    So I really don't see such a bad thing from this, maybe the EA Sports line will get a lot better from such a merger too. Visual Concepts will be able to make football games again and bring baseball to the EA Sports line.
     
  14. Havok83 Registered

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    I dont think EA would ever put out their own console. They make WAY too much in software and thats where the revenue is at for them. By aquiring all these developers, they get closer to controlling the market and can do whatever they want there with less competition. Hardware is a whole other business and if they were to make their own console, they'd only get a fraction of gamers buying their games as opposed to being able to get them from all 3 current gen consoles. Sure with the amount of exclusives they'd have, they'd get plenty buying their console, but I dont think it would be enough to justify creating and publishing games for one console. They'd be stupid to do so
     
  15. hippie_hunter The King is Back!

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    Pachter Says EA Purchase Of Take-Two Inevitable, Rockstar Not Necessarily Along For The Ride
    Posted by Stephen Totilo

    When big financial news is breaking in the gaming industry, I look to Wedbush Morgan Securities analyst Michael Pachter to break things down. I caught him on the phone today while he was having brunch at a yacht club (the same yacht club he was last brunching at when the Activision Blizzard deal was announced).

    Who is this EA-Take Two deal good for? What would happen with sports and the cost of sports games? And why does he think Rockstar won’t necessarily be a part of the deal?

    Pachter broke it down for me…

    Multiplayer: Is this a good deal for EA? Good for Take-Two?

    Michael Pachter: Probably yes and yes. The EA side is a little more complicated… Take-Two is a company that hasn’t made money in a couple of years. It doesn’t have a lot of cash and I think it was a stretch to earn the money they earned this year… They [ultimately] earned about a dollar a share this year. EA is offering them 26 times that. It would take a lot of time to turn that around. They make a lot of money when they make ‘Grand Theft Auto‘ and they don’t when they don’t make ‘GTA.’ Their delusion that they will compete in sports — and the reason I say delusion is because EA’s done everything they can to put the squeeze on them — ultimately I think Take-Two would have to get out of that business. ‘GTA’ is a great asset. ‘Civilization‘ is a great asset. The Irrational guys, ‘Midnight Club.’ And the rest of the guys, who knows…

    Multiplayer: So what about sports? How would getting that part of Take-Two help EA?

    Pachter: EA looks at this business and says, ‘We could make two basketball games, two hockey games, two baseball games… [but] we’re just going to make one of each. … We have a better marketing machine so maybe we can do $300 million instead of $200 million.’ I think that’s rational …

    Take-Two does $200 million in sales. EA does a billion-plus. If you combine them together EA sales will go up more than that combined number because they won’t cut price — you won’t see basketball games come down [in price] before Christmas ever again.

    Multiplayer: How do you see it playing out? Is it inevitable that EA will buy Take-Two? Or can Take-Two effectively block them?

    Pachter: EA started talking to them a long time ago, a year ago, they told me today. EA and Take-Two had a discussion about the acquisition in December. EA made an offer on February 6. [A second offer was made on February 19.] There won’t be another offer because there’s no other video game company that gets the sports position. There’s no media company that will see sports as possible.

    Multiplayer: So is there any way for Take-Two to stop EA from getting their way?

    Pachter: I don’t really think so, unless Take-Two shareholders think the stock is worth $40. But nobody is going to offer to buy it at $40.

    Multiplayer: What role do you see Rockstar playing in this?

    Pachter: ‘GTA’ is clearly a wonderful asset, worth a ton. The problem is that to make ‘GTA’ the way it has in the past you need to engage the Rockstar North guys. They’re not going to want the same deal as what they have now.

    Multiplayer: So is Rockstar a dealbreaker?

    Pachter: It’s not a dealbreaker. EA would love to hire them. But it’s a separate negotiation. I think the ‘Civilization’ — Firaxis guys — will work with [EA].

    Multiplayer: Can you explain what it means that EA would be going public like this? Is that a sign of strength or desperation or something else?

    Pachter: It’s quite similar with what Microsoft did with Yahoo… You go public when you want the court of public opinion to make a decision. I think EA is saying, ‘$25 was a fair offer. We’ll go to $26 but we’re not going any higher.’ I think the vast majority of Take-Two shareholders will jump at this. I don’t see a white knight. I don’t think Take-Two will be able to do anything to block this.

    Multiplayer: Thanks for taking time out of brunch to talk to me today. Enjoy the rest of your Bloody Mary.

    Pachter: I’m eating celery now…

    Multiplayer: Cool. Well let me know the next time you’re having brunch at that yacht club. I’ll clear my schedule to do some work

    http://multiplayerblog.mtv.com/2008/02/24/pachter-says-ea-purchase-of-take-two-inevitable/
     
  16. JohnRico Registered

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    If this happens it wont stop Microsoft or Sony from buying EA. Though EA seems to be sleeping with Microsoft so Microsoft would no doubt win that bid
     
  17. Timstuff Registered

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    If there's only one company controlling the whole biz, we could be looking at a multi-billion dollar crash on par with the Atari crash from way back when. Monopolies are bad for business, and anyone who's used a "Windows" product can tell you that. And the bigger these "mega corps" get, it's only going to become harder and harder for upstart developers to throw their hats into the ring and compete, and that means less and less fresh ideas and personnel being brought into the industry.

    When the predominant ideology in an industry is "merge or die," it tends to make things very unfriendly for mom-and-pop upstart businesses. And in a creativity-oriented craft like video games, that is VERY bad news.
     
  18. JohnRico Registered

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    I guess we will see what happens. It is up to the share holders right ?
     
  19. hippie_hunter The King is Back!

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    EA isn't going to get bought out by either Microsoft or Sony. Again, they make far too much in software and would be severely limiting themselves by making for one console.

    Also EA wants to be a more global brand now and strictly sleeping with Sony (which they did for the past two generations) or favoring Microsoft (which they've done so far this generation) is just a plain bad move. Especially since Microsoft is having a hard time in overseas territories and Sony having a hard time in North America (though gaining ground).

    EA will probably end up being more platform neutral around 2008/2009 as they get more experience with Playstation 3 development and well...the Playstation 3 gaining ground on Microsoft.
     
  20. hippie_hunter The King is Back!

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    Yeah, which is why I think Take-Two will end up getting bought out by EA. Take-Two only really posts a true profit whenever a GTA comes out and the shareholders are probably fed up with all the bull**** of Take-Two with 2K Sports pretty much not being a true competitor to EA Sports like they hoped for, the Manhunt 2 controversy, rarely making profit, and they would probably have to put up with Rockstar North leaving to become independent next year.
     
  21. Isildur´s Heir Registered

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    Take2 already refused it.
    Now, let´s see what EA will do, let´s hope this never happens.
     
  22. JohnRico Registered

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    EA is talking to Take-Twos share holders which hold more power in this decision it seems
     
  23. JohnRico Registered

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    Take-Two Interactive Software Inc (TTWO.O: Quote, Profile, Research) has not ruled out a potential buyout from Electronic Arts Inc (ERTS.O: Quote, Profile, Research), but the timing and price of its current $2 billion offer are wrong, Take-Two Chairman Strauss Zelnick said on Sunday.

    "We didn't slam the door, we just said look, the price is not right and the time is wrong," Zelnick said. He declined to say what price he thought Take-Two should command.


    Asked if Take-Two would enter into formal discussions with EA before the April 29 launch of its highly anticipated game "Grand Theft Auto IV", Zelnick said: "We have to see what steps they take, and we have and will continue to operate in the best interest of shareholders."


    If something happens that creates a reason to do something different, its our job to do something different."

    http://www.reuters.com/article/rbssTechMediaTelecomNews/idUSN2411131420080224

    They have to think about the future if you ask me. Sure Grand Theft Auto will get its time to shine & make alot of money but what will happen after the hype dies down ? Take-Two will go back to **** until the Next, Next Gen Systems come out. They can not survive forever on 1 Grand Theft Auto game per year. Take-Two is better off being sold in the end
     
  24. Isildur´s Heir Registered

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    I can see a merging, not a buyout.
    Then again, 2K Games brand belongs to Take2, so, i see no reason for them to merge with EA.
     
  25. hippie_hunter The King is Back!

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    I don't see a merger happening. EA looks like it wants to buy Take-Two not merge as equals like Activision and Vivendi.

    If Take-Two ends up getting bought out by EA I don't think the 2K Games brand will exist anymore. They'll just get Irrational, Firaxis, Illusion and the others to develop under the EA label and have the 2K Sports developers develop for EA Sports.
     

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