Analysts mixed on possible Take-Two sale

Wedbush Morgan and Nollenberger Capital reps weigh in on the likelihood of the publisher selling, and on who would be interested in buying.


Between Hot Coffee, a stock option scandal that yielded criminal charges against its founder, and an open effort on the part of shareholders to replace the board of directors and CEO, Take-Two Interactive has dealt with its share of corporate drama recently. This morning the company announced that it is considering selling itself outright, but some industry analysts aren't sure who'd be buying.

Last month, Wedbush Morgan Securities's Michael Pachter downgraded his rating of Take-Two stock to "sell," saying the shares were overvalued. In the same note, he addressed the possibility of the publisher being acquired, sold in pieces, or made a target of activist shareholders, calling each scenario unlikely.

Despite the events of the last week, Pachter is sticking to his assessments of the company's prospects, telling GameSpot, "This is crazy, and no, my views are not changing." Pachter said a sale was unlikely, noting that a prospective buyer could have picked up the publisher during its stock slump last year for about half what it would have to pay now. In last month's note, Pachter pegged a purchase price of $2 billion (including a premium on the stock price and restructuring costs) on the publisher.

"I can't see a sale happening, unless there is truly a 'greater fool' out there," Pachter said today.

Nollenberger Capital Partners analyst Todd Greenwald ran down a handful of possible purchasers for GameSpot. Electronic Arts has the resources to pull off such an acquisition and new CEO John Riccitiello would be more inclined to pull the trigger on such a deal than former head Larry Probst, Greenwald said. However, he wasn't sure if the publisher's corporate culture would be a welcome fit for the employees at Rockstar Games, the developer of controversial franchises like Grand Theft Auto and Manhunt.

"Ubisoft might be able to pull it off," Greenwald said. "Other than that, Activision and Elevation Partners are the only other real possibilities I see. I don't see a News Corp. or Viacom going for it."

Whether the company is sold outright or the investor group succeeds in overhauling the board of directors and installing a new CEO, Greenwald sees it as good news for shareholders that should boost the value of Take-Two. "Given their studios and franchises, Take-Two should be able to be a far more profitable company than it currently is," he said.

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