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Courtship Over: EA and Take Two Part Ways

Talks OverThe takeover attempt was highly public.  From early February to late August, for more than six months, it grabbed headlines.  The private courtship that followed lasted less than a month.

On Sunday, Electronic Arts came out of a self imposed quiet period to announce their private discussions with Take Two were concluded.   At this time, EA said, the companies have decided not to pursue any merger.

Just two weeks ago, there was the slight prospect of otherwise.  Electronic Arts had let their tender offer lapse and the two sides of the rare gaming industry hostile takeover were talking.  On August 25th, a week after announcing they were talking, the companies even executed a confidentiality agreement to facilitate private discuss of the prospects. 

At that time of the agreement, the companies pledged there’d be no more news bulletins until they either reached a deal or chose to part ways.  The dating process apparently didn’t go well.  There was no love connection.

EA announced in a press release that “while EA continues to have a high regard for Take-Two’s creative teams and products, after careful consideration, including a management presentation and review of other due diligence materials provided by Take-Two Interactive Software, EA has decided not to make a proposal to acquire Take-Two and has terminated discussions with Take-Two.”

Take Two replied promptly with a press release of their own restating what has largely been their mantra for months.  Chairman Strauss Zelnick said “We remain focused on creating value for our stockholders and our consumers. This has been our goal since EA launched its conditional and unsolicited bid six months ago, a bid which was repeatedly rejected by our stockholders. As part of that commitment, we remain actively engaged in discussions with other parties in the context of our formal process to consider strategic alternatives. We’re especially proud of the success we’ve enjoyed over the past eighteen months and we remain confident in our ability to generate value for stockholders.”

The prospect of new tender offer remains possible but is, in all likelihood, extremely improbable.  At this point, the companies are most likely to move ahead with their businesses and preparation for the holiday shopping season.

ttwo chart smallAs evident in the chart, Take Two’s stock price was influenced by merger speculation for much of the past year.  The conclusion of talks could provide a boost given it marks the end of merger related uncertainty.  It may also lead to additional pullback as speculators withdraw (and investors begin to absorb last week’s NPD retail results). 

Take Two will be a stock to watch on Monday.  Take Two closed Friday at 21.89.

Update 9/15: With the market session nearly closed, and the troubled financial sector weighing heavily on the broader market (Lehman, Merrill etc), Take Two stock dropped heavily Monday. On heavy volume, nearly ten times average, the intraday range dropped to approximately $15.75 to $17.75. That marks a return to near the same trading range the stock was in last January and February prior to EA’s initial offer.

For those tracking the deal, we’ve assembled a comprehensive chronological Deal Diary on Metue.  The document outlines the majority of the news announcements since things began in February.  It also includes historical stock prices to lend perspective.   The Deal Diary can be found here.


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