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Electronic Arts & TTWO still going down?
Posted By: www.apexK.com
Date: 4/18/08 at 2:07 p.m. EST
By Michael White and Sarah Rabil
April 18 (Bloomberg) -- Electronic Arts Inc. extended its tender offer for Take-Two Interactive Software Inc. to May 16 and said it would pay shareholders less after they approved a plan to give more stock to top executives.
The $26 a share bid, which had been set to expire at 11:59 p.m. tonight, was lowered to $25.74 because of the additional stock granted to management, Electronic Arts said today in a statement. The deal is still valued at $2 billion.
The offer extension pushes the bid past the April 29 release of ``Grand Theft Auto IV,'' the latest installment of Take-Two's top-selling franchise. Take-Two has said it won't negotiate until after the game hits stores and is urging shareholders to reject the takeover plan.
``Take-Two's board of directors has maintained from the beginning, and continues to believe, that EA's proposal vastly undervalues our company,'' Chairman Strauss Zelnick said in a statement today. ``It undervalued the company at $26 per share, and it certainly undervalues Take-Two at $25.74.''
Take-Two traded above the bid today, indicating investors anticipate a higher offer. The stock, up 40 percent this year before today, advanced 19 cents to $26.04 at 11:42 a.m. New York time in Nasdaq Stock Market trading. Electronic Arts rose $1.20, or 2.3 percent, to $52.66 and had lost 12 percent.
``For the time being, the extension of the tender deadline significantly lowers the probability that EA will walk away from its offer to buy Take-Two,'' Cowen & Co. analyst Doug Creutz wrote in a note to clients today.
`Grand Theft'
The most likely outcome is a deal in the range of $28 to $30 a share, said the San Francisco-based analyst, who has a ``neutral'' rating on New York-based Take-Two.
Take-Two is counting on ``Grand Theft Auto IV'' sales to justify a higher price or remain independent. The game may generate as much as $170 million in first-day sales, according to Janco Partners analyst Mike Hickey. Earlier versions in the series, which combines shooting and driving as criminals battle for control of U.S. cities, have sold 66 million copies.
Take-Two shareholders approved the stock-incentive plan for executives and re-elected the company's board at their annual meeting last night, supporting management's position that the video-game maker is worth more than the offer from Redwood City, California-based Electronic Arts.
About 6.4 million shares, or 8.3 percent of Take-Two's shares outstanding, had been tendered as of 5 p.m. yesterday, Electronic Arts said today.
Zelnick said in his response today that the ``minuscule number of shares tendered'' shows that his efforts to enhance stockholder value are superior to Electronic Arts' offer.
Extension
The offer deadline was extended because of a second request for information this week from U.S. antitrust regulators regarding the potential transaction, Owen Mahoney, Electronic Arts' senior vice president of corporate development, said today in an interview.
``Any further delays, whether it's regulatory or whether it's intransigence by Take-Two management, could affect the value and the certainty of our offer,'' Mahoney said.
Electronic Arts, the world's largest video-game company, began the tender offer on March 13, after Take-Two refused to negotiate in February.
Electronic Arts, which makes the ``Madden'' football games, had previously said that its bid would fall to $25.74 a share if investors approved the incentive plan for management. The plan grants more stock to some executives, increasing the number of shares Electronic Arts would have to buy in a takeover.
Stock Plan
More than 73 percent of shares that were voted at yesterday's meeting backed the stock plan, which includes a grant of 1.5 million shares to ZelnickMedia Corp., led by Zelnick.
The plan will cost Take-Two about $21.2 million a year, according to a March 26 report by proxy adviser Glass Lewis & Co. The firm recommended investors vote against the plan, saying it would do little to enhance the stock's long-term value. RiskMetrics Group's ISS Governance Services endorsed the plan.
Zelnick was named chairman last year after leading a shareholder revolt that ousted the company's previous management. Benjamin Feder, also from ZelnickMedia, was named chief executive officer at the same time.
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