Stock of the Day
|
Electronic Arts (ERTS)
Electronic Arts Brings Takeover Bid Directly to Shareholders
For well over a year, there have been rumors of a takeover of video game company Take-Two (TTWO: Charts, News, Offers). In recent months, it became more than a rumor, as competitor Electronic Arts placed a bid for the company in February. Feelings on the proposed takeover were mixed, and Take-Two rejected Electronic Arts' offer. The company, however, doesn't seem like it will take 'no' for an answer; this morning, they announced that they are pursuing the takeover, this time making a tender offer directly to the shareholders. Will the shareholders' response be any different than the company, or will Electronic Arts be rejected once again?
|
| Daily Chart |
If you are not able to see the chart, your email client probably does not support javascript. To view it, please click here
|
|
| Today's issue is sponsored by Optionshouse :
Optionshouse: Sharp Tools, Flat Pricing:
Simple and clear commission structure so that you can focus of the power of your trades.
You will never need a calculator to determine your commissions again.
No contract fees, No minimums, No escalating commission fees
It does not get any simpler.
Apply now and receive 50 Free Trades
|
|
| Stock Analysis |
Take-Two has had its fair share of problems. About a year ago, the CEO was forced to leave his position as the company dealt with various scandals and problems. The company has gotten a lot of negative press over the years from the overt sexual content in their popular video game Grand Theft Auto, as well as the inclusion of "hidden" sexual content that consumers were starting to stumble upon. The company has struggled financially at times, although have been doing well recently. Their most recent quarter they were able to report better than expected earnings, and are optimistic for this quarter as well, as they have seen strong pre-order sales for Grand Theft Auto IV, set to be released at the end of April.
|
Buy Electronic Arts for just $4
|
In February 2008, Electronic Arts offered $26 a share, totaling almost $2 billion, to takeover Take-Two, an offer which the company rejected. Take-Two insists that they are worth more than that, and wanted to wait on any takeover talks until after the release of Grand Theft Auto IV. The company has maintained this position, but some of the shareholders seem less likely to agree. The two largest shareholders of Take-Two have both dramatically reduced the percentage of shares they are holding within the last week; it's largest shareholder went from holding 23% of the company to 11.5% of the company, and the other shareholder dropped from 14.7% to only 2.75%. One shareholder even filed a suit against Take-Two for not accepting the offer. The shareholders seem to be strongly indicating that they would like the takeover offer to be approved.
|
So, Electronic Arts has changed tactics, and early this morning announced they are making a tender offer to the shareholders, for the same amount as their offer last month. The offer is open until April 11th, still a few weeks before the date Take-Two said they would be comfortable beginning takeover conversations. Analysts are currently speculating whether shareholders would accept this offer. Many analysts were surprised that Take-Two rejected Electronic Arts' initial offer, speculating that there probably aren't many other companies who are willing to takeover the company, and that Electronic Arts probably isn't willing to offer a much higher price. There was considerable surprise when Take-Two rejected the offer, because many people felt that Electronic Arts might be unwilling to bid again, if they've already refused once.
|
We've now seen that Electronic Arts isn't unwilling to keep trying, but they've certainly decided to try something new. They haven't increased their bid in any way, sending the message that they still think this is a fair price to offer for the company. Their strategy might succeed, if shareholders really are that mad at Take-Two for rejecting the offer initially. If the shareholders aren't convinced that this is a beneficial offer, and they reject the takeover bid, it is very uncertain what the next step would be for these two companies. Although many analysts believe a takeover would be beneficial for both parties, it is unclear if the companies would ever be able to reach an agreement. And if not, and no one else is truly interested, Take-Two will be left to see if they can overcome their problems on their own.
|
Special Offer
|
| Buy ERTS for just $4
|
Profile |
Click here to view a detailed profile of Electronic Arts.
|
|
|
|
|
Back to newsletter list
