Someone who’s been watching the Electronic Arts/Take-Two saga closely proposes this scenario: Now that ERTS’ $26/share offer has been floating publicly for a few days — and TTWO has rejected it — CEO John Riccitello should take his ball and go home.
What happens once ERTS pulls its offer? TTWO shares plummet. Although the company has been constantly rumoured to be on the sales block, ERTS is the only buyer to materialise. If EA pulls out, TTWO is left with nothing but the prospect of shareholder lawsuits from investors steamed about the pay hike/golden parachute Strauss Zelnick and company gave themselves in the midst of takeover talks (as well as the “breach of fiduciary duty” for rejecting the EA offer).
Whether the new comp package is kosher boils down to a he-said/he-said; we’ll let the lawyers sort it out. In any case, it certainly looks like ERTS has the bid-pulling scenario in mind. The company’s Feb. 19th proposal letter included a clause saying the offer was good until Feb. 22 (last Friday).
Although ERTS would certainly like to own Take-Two (primarily for Grand Theft Auto, but also to help it consolidate its grip on sports games, where TTWO has a decent presence), it can live without it. This makes pulling the offer a convincing threat.
Meanwhile, although TTWO has said the $26/share offer grossly undervalues the stock, investors don’t seem convinced. TTWO has been hovering around $27 most of the week, and is now heading back down.
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