Electronic Arts Turns Hostile to Acquire Take-Two

Electronic Arts Inc., the world's largest publisher of computer games announced on Thursday that it has launched a hostile offer for rival Take-Two Interactive Software Inc. valuing it at $2 billion.

Electronic Arts makes the Madden football and Need for Speed racing games and it now wants to include Take-Two's top-selling “Grand Theft Auto” series to maintain its industry lead.other than the GTA series Take-Two also makes games like Manhunt, Bioshock and Major League Baseball 2K.

Redwood City, California based Electronic Arts (EA) said that it will go directly to Take-Two's shareholders with the offer of $26 per share which Take-Two's management had rejected last month.

The $26 per share cash tender offer is at a 4% premium to Take-Two's closing stock price of $24.91 on Wednesday and at a 64% premium to the company's Feb. 15 closing stock price, which was the last trading day prior to Electronic Arts' revised offer.

The tender offer by EA is set to expire at midnight on April 11, unless extended. Take-Two's annual shareholders' meeting is expected to take place on April 10.

John Riccitiello, the chief executive of EA, defended the company's takeover bid. "We believe that the offer we made is compelling." He further said, "So far, Take-Two's board is indicating they don't want to negotiate."

Responding to the hostile takeover bid by EA, Take-Two has issued a statement advising shareholders to take no action for now on EA's offer. The company has promised shareholders that it would give them its recommendation and the reasoning within 10 business days.

Take-Two executives insist that EA is trying to buy the company cheaply just before the April 29 launch of Grand Theft Auto IV, widely expected to be one of the best-selling games of 2008. Take-Two's management has said that they are prepared to open talks with EA on April 30.

Strauss Zelnick, chairman of Take-Two asserted that EA’s offer doesn't acknowledge the value of games including Grand Theft Auto which is the gaming industry's top-selling series with 66 million copies purchased worldwide. He added that the offer ignores the tremendous operational progress that Take-Two has made in the past year.

Even Riccitiello agrees that Grand Theft Auto IV would be "the biggest hit in the industry in this generation" with analysts expecting sales of more than 10 million units, but he added that this expectation was "baked into our $26 offer".

Take-Two shares rose 53 cents, or 2.1%, to $25.44 in midday trading, while Electronic Arts shares dropped 69 cents, or 1.5%, to $46.54.