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Default EA - Take Two Takeover Goes Hostile

March 13th, 2008, 18:05
Voodoo Extreme posts the latest developments in Electronic Art's attempt to acquire publisher/developer TakeTwo Interactive:
Electronic Arts Inc. (“EA”) today announced that a wholly owned subsidiary of EA commenced a tender offer for all of the currently outstanding shares of common stock of Take-Two Interactive Software, Inc. (“Take-Two”) for $26.00 per share in cash.
The offer is valued at approximately $2 billion and represents a 64% premium over Take-Two’s closing stock price on February 15, the last trading day before EA sent its revised proposal to Take-Two.
EA Chief Executive Officer John Riccitiello: “This is a great opportunity for Take-Two shareholders. We believe Take-Two investors will see our tender offer as the best way to maximize the value of their investment in Take-Two. This tender offer provides a clear process to complete the proposed transaction. For EA shareholders, the combination would add additional intellectual properties to our already strong portfolio and welcome Take-Two’s talented creative teams to the great development organization we’ve built at EA.”
TakeTwo previously rejected this bid as too low, and the decision now goes to the shareholders. VE gives the definition of tender bid here:
A tender offer is a corporate finance term denoting a type of takeover bid. The tender offer is a public, open offer (usually announced in a newspaper advertisement) by an acquirer to all stockholders of a publicly traded corporation to tender their stock for sale at a specified price during a specified time, subject to the tendering of a minimum and maximum number of shares. Tender offers are made directly to shareholders and are commonly used to takeover a target company when that company's board of directors does not approve the acquisition.
More information.

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March 13th, 2008, 18:05
Take-Two management's re-writing of their own contracts last week to bind the company with more burdensome exec salaries in the event of dismissal tells you all you need to know about where Take-Two believes this is going.

When the management is busy creating golden parachutes for themselves, it's over.

This bid shows every indication that it will succeed. Moreover, it should succeed. Take-Two's shareholders are getting a huge premium.

.Robert
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March 13th, 2008, 18:52
Agreed. If I owned stock in Take Two I obviously would like at least the option to sell that stock for a massive profit.

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March 13th, 2008, 19:15
Isn't this the same EA who, in a recent interview post, basically acknowledged that their takeovers of companies was harmful to the companies and to the industry? And how they had learned from those mistakes? It was posted here on the watch in the last month or so.

Of course it was all just corporate doublespeak BS. EA's business strategy is to absorb companies before they can become competitive enough to eat into their profit margins.

If this goes through, look for Take Two's franchises to eventually tank and the company itself to either become a "label" or absorbed into the collective.

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March 13th, 2008, 19:45
EA = BORG

This just adds - cynically speaking - of my perception of EA like a parasite: cling on them, suck them out, then let the empty hull fall down and vanish.

Or maybe even the word "Vampire" is the right term ?

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March 13th, 2008, 19:59
Originally Posted by HellRazor View Post
Isn't this the same EA who, in a recent interview post, basically acknowledged that their takeovers of companies was harmful to the companies and to the industry?
Riccitello didn't say that. He said that absorbing developers and trying to force their established firm cultures, modes of thinking and methods of doing business into a new rigid EA mindset was a demonstrably bad idea in the past that plainly didn't work. Rationalizing costs by moving employees was way more harmful than any savings in overhead costs it may have brought.

It brought harm to the studios they bought insofar as it plainly didn't work. Unspoken was the logical continuity that implied that shareholders didn't get the value they expected to get when their acquisitions were managed in that way.

He didn't say anything about buyouts harming the industry, and I don't even think at this stage you can logically infer or imply that either. That's you saying that - not Riccitello.

Moreover, Riccitello said that EA had learned over their mistakes in the past. Instead, EA was adopting a City State approach to management of their individual studios to preserve independence and firm culture.

We have good reason to believe him. For the most part, that is was what Elevation Partners (under Riccitello) did with Pandemic and BioWare - and that arrangement was what Riccitello promised to not disrupt when EA bought out Elevation's interest in those developers (for a ton of dough, too).

And it's what EA is saying it will do should it succeed with Take Two. There is IP of value there, sure. There is strategic protection of EA's ongoing sports franchises. And of course, there is the jewel, Rockstar.

You don't pay hundreds of millions of dollars for BioWare or - indirectly - for Rockstar and GTA - just to get an IP. The value is not really in the IP - it's in the accumulation of individual employees with team experience with each other at their respective studios. When your greatest asset is people who can quit and go work for somebody else - your short, medium and longterm interest is insuring that does not happen and that those employees, more or less, remain where they are - being creative and making great games for you.

Buying out game development studios is not like you are rationalizing the production assets of automotive manufacturing or airline routes. It's a different analogy and requires a different management approach. EA learned the hard way.

.Robert
General Manager, roXidy Games Inc.
Last edited by Steel_Wind; March 13th, 2008 at 20:08.
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March 13th, 2008, 20:17
“I think it's way too early to tell, but I will tell you that our attraction to the asset of Take-Two is because we love their studios—Rockstar, Visual Concepts, Irrational [2K Boston and 2K Australia], Firaxis—and we like their intellectual properties. This transaction as we're proposing it is not about synergies at the studio level”, Riccitiello said. On the other hand, EA has a long history of closing the studios it has acquired.

So maybe, Riccitiello should love Take Two’s games from a distance. Unfortunately it seems like the company is decided to acquire Grand Theft Auto makers at any cost…

Link

I think it's quite clear they want the IP's and they want them before GTA4 is published.
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March 13th, 2008, 20:38
Reminds me of Victor Kiam: "I like [GTA and Bioshock] so much, I bought the company".
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March 13th, 2008, 20:57
There's more on the BBC site here. And if you really think that the business side of things has nothing to do with the people making the games… well I dunno about that. I don't know anyone in any business that isn't going to be getting the "golden handshake" saying oh fantastic we are being bought out I have no worries now.
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March 13th, 2008, 23:52
Steel_Wind:

Unfortunately I didn't have the article in front of me to reference. Had to go from memory. Looks like I gave Riccitello too much credit.

My basic point is, I seriously doubt EA has learned all that much. But time will tell. Let's see where any of their recent aquisitions are in another 5 years or so. My guess is that they will go the way of most of EA's other acquisitions.

And yes, I think EA's continual stunting of the industry by eliminating their competition through leveraging their buying power is not a good thing for the industry overall. Its maybe a good thing for EA and EA shareholders, but that is a different thing. Competition is good for innovation, monopoly is (generally speaking) not so good.

But hey, we can all rest easy knowing that Madden Football XXXXX is on the way.

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March 14th, 2008, 13:56
Originally Posted by HellRazor View Post
And yes, I think EA's continual stunting of the industry by eliminating their competition through leveraging their buying power is not a good thing for the industry overall. Its maybe a good thing for EA and EA shareholders, but that is a different thing. Competition is good for innovation, monopoly is (generally speaking) not so good.
They have learned quite a lot from Microsoft, imho.

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March 14th, 2008, 22:45
As I understand it, for some reason or various other reasons?, Take Two have been close to bankruptcy/ruin or whatever the correct legal term might be named in English?

It is also my understanding that Take Two refused this offer, because they thought the bid was way too low —— they wanted to send a message like the one you sent from camp in the summertime:

Here it goes very well —- send more money — please…

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