Take-Two reiterates EA rejection at annual meeting

Executives of Grand Theft Auto publisher tell shareholders they will not yield to EA's $2 billion takeover bid--but take only two questions.

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A month and a half ago, Electronic Arts stunned the game industry by announcing an unsolicited $2 billion takeover bid for Take-Two Interactive. The offer was a whopping 64 percent premium over Take-Two's closing stock price the prior day, and was regarded by analysts as being too generous for shareholders to turn down.

However, the board of the Grand Theft Auto publisher didn't feel the same way. On March 26, company directors--led by Chairman Strauss Zelnick and CEO Ben Feder--urged holders of Take-Two stock to reject EA's "inadequate" offer, which had turned hostile. EA then relented, giving its takeover target until 11:59 p.m. EDT on Friday, April 18--the day after Take-Two's annual shareholders meeting.

The day before said summit--which began this evening at 6:34 p.m. in New York City--Take-Two announced that its self-imposed April 15 deadline for shareholders to nominate opposing candidates for the company's board of directors or propose other new business had passed without incident. It then went on to say in a statement that "there will be no voting or decisions made at the annual meeting regarding EA's offer. However, we will be giving a brief presentation at the meeting on the reasons our Board rejected EA's offer."

Despite Take-Two's downplaying of the event, many believed that today's meeting would be the scene of high drama. The publisher's share price has been hovering around EA's $26-per-share offer price. If EA withdrew the offer and the price dropped, the board could become the victim of a stockholder coup much like the one that installed it last year. However, with analysts predicting that the April 29 launch of Grand Theft Auto IV will break entertainment-industry records, Take-Two could soon see its stock rise above current levels.

After a brief clip showing off the company's games, the meeting began with a rundown of the prior year's achievements by Feder. After noting successes such as BioShock being "the highest-rated 360 game of all time," the CEO almost nonchalantly announced that GTAIV has gone gold, and was "in production and in trucks en route to retailers." While largely assumed, the move confirms that the game would not be delayed even in the event of an EA acquisition, as some analysts theorized.

Then, it was onto a strongly worded warning to those present to abide by the rules of the meeting, and that only "stockholders of record" could present at the meeting. He then issued a stern warning that no one was to address EA's offer until the board had made their case at the very end of the presentation on why the bid was rejected.

After confirmation that enough stockholders were present for a quorum, several minutes of dull procedural proceedings ensued. Votes were cast to elect a board that would sit until the next stockholders meeting in 2009. Results of the vote were not announced at the meeting.

Finally, Chairman Strauss Zelnick took the stage to "highlight the value of the company" and explain why EA's offer was "the wrong price at the wrong time." He said Take-Two offered to meet with EA after the launch of GTAIV, which prompted EA to go hostile. He said the board's subsequent rejection was because "nothing in their conditional offer had changed."

"We're in the position of generated shareholder value in a sector at the fastest-growing segment of the entertainment industry," elucidated Zelnick. "EA's offer came at a highly opportunistic time, as it comes right before the launch of the next installment in the most successful franchise in this entire industry. We've received several advance reviews, and with one exception, they are all perfect scores. My mom couldn't write a bad review about this game."

Zelnick also said that EA's offer didn't take into account the rest of Take-Two's portfolio, which includes BioShock, Civilization, Midnight Club, and 2K Sports brands. He also pointed out Take-Two had "streamlined" existing operations as well as opened new offices in Asia.

"We don't think the EA offer properly compensates you, the shareholders, for the synergies EA would enjoy," continued Zelnick. He said analysts valued said synergies at over $210 million per year, with EA enjoying massive savings from not having to compete with Take-Two's sports line. "When we take on EA in sports head-to-head, we beat them every time," said Zelnick, referring to the two companies' competing NBA and NHL franchises. The companies had competing NFL and MLB series before EA locked down exclusivity for the former and Take-Two for the latter.

In conclusion, Zelnick reemphasized why he and his colleagues rejected EA's advances. "The board believes that Take-Two is worth more than $26 per share," he stated. "That said, we are 100 percent committed to creating more value for stockholders, and will consider all options, including staying independent."

Zelnick went on to emphasize that the Take-Two board would also consider a buyout from anyone for the right price--but on its own terms. "We are more than ready to begin formal discussions on April 30, a date which will provide us with optimum position and security," he explained. "In the interim, we are open to informal talks and will sign confidentiality agreements."

Finally, he closed on an upbeat note, proclaiming, "Interactive entertainment is the most profitable section of the entertainment industry. This is the sweet spot."

The floor was then opened to stockholders' questions--of which there were only two. First, Zelnick declined to answer a query as whether Take-Two had entered into any confidentiality agreements with other potential buyers, as it has previously publicly hinted. Secondly, he refused to comment on today's announcement that the Federal Trade Commission was investigating the possibility that an EA takeover could violate antitrust laws. Then...the meeting was unceremoniously adjourned, leaving analysts and reporters to ponder Take-Two's next move.

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