Take-Two To EA: No Thanks, Again (TTWO, ERTS)

As expected, Take-Two’s board has formally rejected Electronic Arts’ $2 billion bid, using the same argument it has made in the past: We’re worth more. Come back and talk to us after we release our next blockbuster game, when our stock will have shot up well beyond your $26 offer.

Next steps: Some back and forth manoeuvring. Take-Two (TTWO) is trying to make it harder for EA (ERTS) to pull off a successful tender offer. Among other moves, it’s adopting a “shareholders rights agreement” that creates a class of preferred B shares if EA (or anyone else) buys a 20% stake in the company.

EA could counter by simply raising its bid and making yet another offer, or by calling TTWO’s bluff and walking away from the company. TTWO execs have argued that when they release the newest Grand Theft Auto game, at the end of April, investors will suddenly realise that the company has a blockbuster franchise, and bump up TTWO shares accordingly. We continue to be sceptical about that.

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