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Analyst expects EA hostile takeover of Take-Two

Michael Pachter says proposed acquisition is happening whether Grand Theft Auto IV publisher likes it or not, believes sports domination is the driving force behind it.

Earlier today, Electronic Arts went public with the news that it had offered to acquire Take-Two Interactive for nearly $2 billion--and that Take-Two management had turned the offer down. EA's offer broke down to $26 per share for Take-Two, a 64 percent premium over the stock's price of $15.83 at the time the offer was made.

Speaking with GameSpot today, Wedbush Morgan Securities analyst Michael Pachter questioned Take-Two's judgment in turning down the deal.

"The share price on Friday tells you that investors think the share price is $17. So an offer of $26 by definition is more than adequate," Pachter said. "And if the only argument management makes is that they have a turnaround plan and to give them time... It could take two or three years for them to get [the stock price] to that same $26. Who in their right mind thinks $26 three years from now is better than $26 today? This is a bird in the hand."

Despite the rebuff, Pachter predicted the acquisition will happen one way or the other. If the board of directors won't sell the company, he said EA can perform a hostile takeover, buying up enough shares on the open market to gain control of the company and show the current management team the door.

"By going public, EA is telling you, 'This deal is happening.' The only way you can credibly reject the deal is if there's a better one behind it," Pachter said. "I don't see how anyone can afford to pay this much or more for the stock."

More so than Take-Two's hit properties like Grand Theft Auto IV and BioShock, Pachter believe sports are the driving motivation behind the deal, and a main reason he doesn't expect other acquiring suitors to come calling. The economic advantages of eliminating 2K Sports--EA Sports' primary competitor in the market--are so great that they could pay for the $2 billion deal on their own, Pachter said.

"There's only one company that can make sense out of an acquisition of Take-Two, and that's EA," Pachter said. "For anyone else to buy Take-Two, they'd have to decide either to bloody themselves competing in sports against EA, or shut down the sports business and give up. Either way, there aren't many people who are going to pay a premium for the right to engage with EA or shut down that business."

One question mark about an acquisition of Take-Two is how much of the company can actually be transferred to EA. Pachter said key development personal like Firaxis' Sid Meier, 2K Boston's Ken Levine, and Rockstar's Sam and Dan Houser likely have change-of-control clauses in their contracts that would allow them to jump ship if ownership of the business changes hands.

"If any of the people under employment contracts with Take-Two have lawyers who are worth anything, there are change-of-control provisions," Pachter said. "They all should have that, but I don't think this deal is about retention of employees. With the [possible] exception of the Rockstar North guys, I think all of the [contracted] employees at Take-Two would actually welcome working for EA. I think Sid Meier would love to see Civilization have broader distribution and more focused marketing, and EA is really good at both."

251 Comments

  • TBundy505

    Posted Jan 17, 2010 1:30 am GMT

    Oh yah I'm sire Sid Meier would love to have EA screw up his masterpiece that is civilization, I'm sure EA would manager to phase him out and gain controll of civ, and yah like take-twos workers really want to work for a company who's games mainly suck.

  • bane546

    Posted Feb 27, 2008 3:35 am GMT

    besides the utter bull**** that EA has decided to drop right on 2K, how the hell can they say the only employees that won't be retained are the Rockstar guys??? effing GTA sells more than their other games combined and if they lose that then what was the point of the takeover in the first place??? Good job EA, way to look like douchebags in yet another new and creative way!!!

  • LoganFerguson

    Posted Feb 27, 2008 1:23 am GMT

    Mackie_1986 -

    "Just like the Playstation has wiped the Xbox 360 off the map, i'd say EA will do the same." Where do you get your facts? So far, in this three console war, the winner is the Nintendo Wii. Playstation is a DISTANT, and I mean, so far back you can't even SEE them, third. Xbox 360s outsell PS3s two to one. But Wii's outsell the 360 and PS3 COMBINED two to one. The reason the Wii is so popular, however, is because it's found a niche amongst casual gamers, and surprisingly, the elderly. The Wii is becoming a staple at retirement homes and communities, allowing old farts to play video game recreations of sports and simple games they love to play, like bowling or tennis. The elderly don't have the eye-hand (really, finger) coordination to play the more hardcore games that come out the 360 and PS3. But simple arm movements they are still quite capable of, and the Wii has capitalized on that.

    But for us more hardcore gamers, (like the ones visiting Gamespot regularly and commenting on newspots like this) are buying the 360. Why? Not because of HD movies. (See how smart Microsoft was NOT to design the 360 around the HD, but leave it to an add-on? Now they can easily rebound with a Blue-ray add-on, and for ALOT cheaper than buying a $400+ PS3). Choice of game titles? Well, the 360 has been out longer, so it's exclusive title list is bigger, and always will be. PS3 cannot "Catch Up" to someone who has a year and half head start. They can only start to come out with more better quality games (they hope) that will attract gamers to them (like Metal Gear Solid and God of War). In reality, the real reason the 360 is winning the war against the PS3 is because of Xbox Live. The service is far beyond anything anyone had hoped for. PS3's online service so far cannot compare. Microsoft has a better grip on how to handle the future of online services far better than Sony (they are, after all, in the computing business).

    Right now, the Playstation hasn't blown anyone off the map, except maybe the Sega Dreamcast, but that only forced them into doing something that was better in the long run for all of us; go back to making quality games.

  • Merl57

    Posted Feb 26, 2008 9:28 pm GMT

    yeah I really REALLY respect 2k for not giving in to the EA siren's calls. We need to have more than 1 game per sport. That is insane that it has come to this. EA should have had a serious offer because 2k games are much more set to a higher standard.

  • ShipwreckX

    Posted Feb 26, 2008 4:34 pm GMT

    I do hate EA but mattcake is right I mean look at C&C3. It was good tho I can not say the same for the newer ones set to come out. They Might do a good job (hopefully) if they buy Take-Two (witch I hope does not happen). O and by the way If EA does buy Take-Two does that mean Thompson will try to destroy EA in stead? If so may by he will either (ironically) destroy the Plague know as EA or will he finally be crushed in the court room for good?

  • mattcake

    Posted Feb 26, 2008 11:55 am GMT

    Yes yes EA is a big nasty corporation who used to be cool on the Megadrive/Genesis and is now the devil... but they are smart, they wont mess with GTA or whatever comes next from Bioshock - sports fans however, should be a little more worried But then what better way to make profit than to own the 2 "competing" sports franchises? I doubt EA would interfere much with anything, they may put out some bad games but theyre not stupid.

  • brain20035

    Posted Feb 26, 2008 10:27 am GMT

    EA is plague spreading all over the world...

  • el_ken

    Posted Feb 26, 2008 7:54 am GMT

    EA destroyed football video games...so now it looks like GTA is next on their list =(

  • Mackie_1986

    Posted Feb 26, 2008 3:32 am GMT

    EA taking over Take two isn't such a bad thing as long as certain ties stay intact, when EA Brought the Burnout series it only got better in my eyes and the company still worked with Criterion to better the game. Just like the Playstation has wiped the Xbox 360 off the map, i'd say EA will do the same. my main concern is far from what happens to sports titles, no ofence but they all seem the same to me and the different years are the only thing i c different in the games, prehaps the graphics, my big concern is GTA, The game is driven by fresh ideas and inovative thinking and to take that away from Take two will prehaps in the long term wound and possible ruin and destroy the series all together.

    MM

  • ---n00b_kid---

    Posted Feb 26, 2008 2:55 am GMT

    EA is destroying the game industry. GTA is gonna suck bad if this deal goes through.

  • Dryker

    Posted Feb 26, 2008 12:56 am GMT

    I don't know if a hostile takeover would be wise for EA, it could further harm their already tarnished reputation. You know what, who cares about the reasons, this is just going to piss me the f*** off if they do.

  • HuusAsking

    Posted Feb 26, 2008 12:13 am GMT

    Does anyone happen to know if Take Two has takeover safeguards. If so, what might they be? The article already mentioned change-of-control clauses--essentially "poison pills". There may also be the possibility of a splinter-off to keep some of the "innocent bystanders" (Rockstar and Firaxis, for example) from being caught under EA's umbrella.

  • MattDark

    Posted Feb 25, 2008 11:19 pm GMT

    @Zoomer30 - Wow, talk about your elite fanboy BS.
    EA is a corporate 3RD PARTY team, who only make all the money they do because they release on every format they can.

    If EA is an MS company, then Ken Kutaragi is a Nintendo operative who has been trying to bring down sony from the inside...

  • SteelRush

    Posted Feb 25, 2008 10:54 pm GMT

    Hmm, this would kill their primary sports competition. If this happens, can you imagine how bad sports games are going to be when there is absolutely NO choice?

  • Raivon

    Posted Feb 25, 2008 9:55 pm GMT

    I believe this isn't the end of EA's row because there is a lot more to come .

  • Bloodhawk_DX

    Posted Feb 25, 2008 8:05 pm GMT

    Nobody has any control over this. I see a lot of crying and whining but welcome to corporate greed and capitalistic ideals. This isn't about games, it's about the cash. EA doesn't care about the quality of your games because they still make fat profit. You want to hit EA where it hurts? Convince all these casual gamers who suck up Madden games by the millions to boycott. Of course, since many casual gamers have little concept of quality gaming that's unlikely to happen. So, here we are back where we started. EA is taking over and there is little we can do about it.

  • Pete5506

    Posted Feb 25, 2008 7:28 pm GMT

    Why must EA killing everything

  • Zoomer30

    Posted Feb 25, 2008 6:48 pm GMT

    EA stopped making good sports games years ago. I will never buy another Madden, thats a fact. EA is a MS company, 100%. They may as well stop developing games for the PS3, they are embarrassing themselves as they stuff their face at the food trough of Microsoft.

  • blackace

    Posted Feb 25, 2008 6:39 pm GMT

    It would be funny if they bought out Take-Two and all the employee quit and created a new company and left EA with an empty shell. lol!! Anyway, I think M$ should buy out Take-Two for 3 million. They need to get some more exclusive games anyways after Bungie and Bizzarre Studios left.

  • FearNinja

    Posted Feb 25, 2008 6:07 pm GMT

    EA wants to buy everyone out so so that no one will be able to compete with them. Then they do not have to actually try making good games.

  • truenextgen

    Posted Feb 25, 2008 5:07 pm GMT

    I dont think anyone has to try and kill off EA. I think they have done that enough themselves. It seems were seeing alot of this," if the average is al' you have to choose from. Than average is great." Mentality for game business's as of late. And I cant blame anyone but the gaming public of the last 5years or so. This who stability with one way thing is so much bull. But people wounder why the economic balance is going more and more out of whack. Microsoft wants Yahoo for what? More to just theirs, EA wants Take 2, to make the sports market one way. And the basic gaming public will buy it up Like RRoD machine. Because its the only choice at the time. And they have to have it. I also forgot, GTA would also be involved. Great GTA with horrid none innovated graphics and games.

  • Kraige

    Posted Feb 25, 2008 4:49 pm GMT

    Lmao great plan Hihatrider87 I might join you.

  • Hihatrider87

    Posted Feb 25, 2008 3:03 pm GMT

    so should i buy some stock in take-two right about now? $17 buy in then ea buys it form me for 26?

  • AvIdGaMeR444

    Posted Feb 25, 2008 2:57 pm GMT

    panamaalex...you are crazy if you think that gamers standing up to EA would change any of this. What do you propose? An online petition? Yeah...those always work (heavy sarcasm).

  • panamaalex

    Posted Feb 25, 2008 2:36 pm GMT

    I think it is time that WE, as consumers, put a stop to this. It is clear to me that EA does not like competition. I opposed the NFL deal, I opposed the ESPN deal, and even the BioWare/Pandemic Studios deal. This is way out of line. We need to send a message to EA. I for one will stop buying EA games if this deal goes through. (No more FIFA for me, I like Winning Eleven better anyway.)

  • TKandPBC

    Posted Feb 25, 2008 1:41 pm GMT

    If this would allow NHL 2K series to finally use the shot stick, then why not? As long as they keep 2K's personal, then the quality will be the same, except it would say EA on it instead of 2K. Hope this doesn't mean that Bioshock will go multi-platform!

  • AvIdGaMeR444

    Posted Feb 25, 2008 1:36 pm GMT

    Now that I've read this article, it seems like this is really going to happen Michael Pachter has been on a roll with his predictions lately.

  • enisguy

    Posted Feb 25, 2008 1:25 pm GMT

    This problem wouldn't exist at all if the idiotic masses would stop buying the same shatty game year after year ater year (Madden).

  • madmaxx101

    Posted Feb 25, 2008 1:17 pm GMT

    MAN I HATE EA GAMES....FU for killing NFL blitz

  • Sanchito731

    Posted Feb 25, 2008 12:57 pm GMT

    So if they buy take-two then no more nba 2k or mlb 2k. All we have then is ea sports games. Wow. then I won't buy any more sports games for the rest of my gaming life.

  • cjnwo4life

    Posted Feb 25, 2008 12:47 pm GMT

    Losing the rockstar guys would only leave them w/ sid and ken and we all know the rockstar guys sell more games than the both of them combine in their entire gaming history. Good luck EA!

  • NFSU2_RC3

    Posted Feb 25, 2008 12:37 pm GMT

    I hate ea. anything they put out is complete garbage

  • Diernes

    Posted Feb 25, 2008 12:22 pm GMT

    EA and Atari just need to die right now.

  • ThisIsntLeonard

    Posted Feb 25, 2008 12:19 pm GMT

    EA = the Clear Channel of videogames.
    No, wait.
    EA = the Clear Channel AND Viacom of videogames.

    Evil, evil people.

  • trestx

    Posted Feb 25, 2008 12:16 pm GMT

    Take-Two may have to file with the SEC for anti-trust/monopoly protection. I hope they come through ok.

  • GrgSpunk

    Posted Feb 25, 2008 12:04 pm GMT

    Analysts + videogaming article = BS

  • CanesThing26

    Posted Feb 25, 2008 12:02 pm GMT

    this is really bad news. i dont think any of the workers at Take-two will want to work at EA. EA blows big time. Madden is possibly the worse sports game i've ever played. it has so many flaws in it and it doesn't flow like football. when will they take there time to actually make a good sports game. ie Skate is a really great game form ea they took there time. all there others they rush them out in a hurry,

  • CanesThing26

    Posted Feb 25, 2008 11:59 am GMT

    this is really bad news. i dont think any of the workers at Take-two will want to work at EA. EA blows big time. Madden is possibly the worse sports game i've ever played. it has so many flaws in it and it doesn't flow like football. when will they take there time to actually make a good sports game. ie Skate is a really great game form ea they took there time. all there others they rush them out in a hurry,

  • CanesThing26

    Posted Feb 25, 2008 11:58 am GMT

    this is really bad news. i dont think any of the workers at Take-two will want to work at EA. EA blows big time. Madden is possibly the worse sports game i've ever played. it has so many flaws in it and it doesn't flow like football. when will they take there time to actually make a good sports game. ie Skate is a really great game form ea they took there time. all there others they rush them out in a hurry,

  • CanesThing26

    Posted Feb 25, 2008 11:58 am GMT

    this is really bad news. i dont think any of the workers at Take-two will want to work at EA. EA blows big time. Madden is possibly the worse sports game i've ever played. it has so many flaws in it and it doesn't flow like football. when will they take there time to actually make a good sports game. ie Skate is a really great game form ea they took there time. all there others they rush them out in a hurry,

  • Predator_Spear

    Posted Feb 25, 2008 11:49 am GMT

    ******** EA wants to monopolize the entire damn market.

  • chaingun543

    Posted Feb 25, 2008 11:43 am GMT

    It's sad because even as recent as 10 years ago, the video game was the only entertainment medium that wasn't corrupted by giant corporations owning everything, but then it became more popular so kiss those days good-bye. It's too bad we're seeing companies just buying up competitors...just not a good thing for games.

  • Coasterus198421

    Posted Feb 25, 2008 11:37 am GMT

    EA sucks for that. I am going to tell you now: If Bioshock sucks, I am going to be very mad. Also: If all the games and all the game consoles come from one company in the future, I can pretty much garantee you I won't be playing games anymore, and I think 90% of the rest of us are thinking that way as well.

  • wsshell

    Posted Feb 25, 2008 11:29 am GMT

    hey lets boycott them!!!!
    wait a second it seems no one cares

  • mrbojangles25

    Posted Feb 25, 2008 11:21 am GMT

    "I think all of the [contracted] employees at Take-Two would actually welcome working for EA"
    this made me laugh. NO ONE likes workign for EA

  • Pedro7_2000

    Posted Feb 25, 2008 11:01 am GMT

    I hope the guy's right about change-of-control clauses...otherwise GTA V and BioShock 2 will sux. EA always presses to get their games out ASAP, rather than letting the games come when they're done.
    I'm not sure if EA even cares about these two IPs anyhow. They just want to wholly own the sports game market!

  • Darkstrauss

    Posted Feb 25, 2008 11:01 am GMT

    can anyone say cartel?

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