Take-Two takes up severance plan

Following EA's seemingly impromptu "friendly" acquisition offer to the tune of $2 billion or $26 per share, Take-Two's stock rocketed moonward more than 50 percent, surpassing the bid and topping off at $27.61. However, with Take-Two's board outright rejecting the offer on grounds that it was undervalued--despite that fact that it offered then-shareholders a more than 60 percent premium--interest in the stock has begun to dwindle, with the asking price dipping below $25 today.

Although investors may have begun to lose confidence in their ability to cash in on the buyout, Take-Two has laid out a severance plan in case the company is bought out, reports Reuters. According to the news service, the plan went into effect on March 3 and was confirmed by a Securities and Exchange Commission filing dated March 7.

Reuters reports that executive employees will receive 1.5 times their salary as well as a bonus for up to 18 months in the eventuality that they are fired "without cause within a year of a change in control." All other employees will be paid out up to six months' worth of their salary. The plan does not include certain top executives, including board chair Strauss Zelnick and CEO Ben Feder, because they are covered under a different severance package.

According to an SEC filing, the plan's implementation is intended to provide security and peace of mind to employees concerned over the takeover bid. "Our 'Change in Control Employee Severance Plan' provides for minimum levels of compensation for all employees in the event that an employee's position is terminated as a result of a change in control of the Company," reads an open letter to employees disclosed through the SEC filing. "These types of plans are fairly common for publicly traded companies. In fact, both Electronic Arts and THQ have change-in-control severance plans."

Speaking to Reuters, Janco Partners analyst Mike Hickey noted, "The bid probably created fairly large internal disruption, and without a severance plan, employees are worried about losing their jobs. They want to keep people focused and give them some sort of support."

Since EA disclosed its buyout offer, Take-Two's board has cited several reasons to dally over what some industry watchers have called an overvalued offer. Most recently, the publisher said it was entertaining "informal indications of interest" from other unnamed suitors. However, one publisher not interested in Take-Two is Activision, which said two weeks ago that the tumultuous Take-Two didn't meet its acquisition criteria.