EA takes it to the streets with Take-Two's shareholders

EA has gone over the resistant heads of Grand Theft Auto franchise leader Take-Two, making an appeal directly to the shareholders and offering approximately $2 billion in cash to buy out its common shares.

The move is a smart one from EA, as Take-Two has been at the mercy of the shareholders in the past. Almost one year ago, the company's CEO and entire board of directors were ousted in a shareholder uprising from investors ZelnickMedia, allegedly spurred by the company's worsening financial situation.

EA recently offered to buy each outstanding common Take-Two share for $26 in cash, 64% higher than the stock's closing price when the proposal was made, but the board of directors promptly turned the offer down.

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It was at this point that analysts began to see a hostile takeover as imminent. The offer, according to analyst Michael Pachter, was EA's way of saying "This deal is happening," because the only credible way to reject it would have been if there was another one outstanding. There were no other offers.

Shareholder discontent over Take-Two's refusal became apparent this week as stock owner Patrick Solomon sued Take Two. His claim is that ZelnickMedia's insurgent board of directors refused EA's acquisition offers in order to re-tool their management fees and bonuses in the event the company were sold. Their fees went from $3.8 million to $16.5 million after the buyout refusal.

Now able to capitalize on the publicity of the board of directors' alleged graft, EA yesterday turned the $26 per share cash offer directly to the shareholders. The offer will stand until April 11, at which point it will either expire or be renewed. Take Two's annual shareholder meeting is scheduled for April 10, and the company's release date for Grand Theft Auto IV is April 19.

Take Two is required by law to issue an official statement within ten days of this tender offer.

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