In a move that should shock no one following Take-Two Interactive Software Inc., the New York video game publisher, which is facing an unsolicited $1.9 billion bid from industry giant Electronic Arts Inc., was slapped with a lawsuit over its executive compensation package. The news of the suit follows shareholder defections, a move that may be both beneficial and troublesome for the company -- but more on that later.
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Law firms Prickett, Jones & Elliott and Schiffrin, Barroway, Topaz & Kessler LLP have filed a suit in the Court of Chancery in Wilmington, Del., on behalf of shareholder Patrick Solomon alleging that Take-Two Interactive Software Inc. chairman Strauss Zelnick and CEO Benjamin Feder sought to enrich themselves at the expense of shareholders through a compensation agreement, amended in February after Electronic Arts Inc. made offers for the company.
Meanwhile, mutual fund manager FMR LLC has cut its stake in Take-Two to 2.75% from 14.7%. The move may benefit Take-Two, should EA go hostile with its bid, because FMR is a shareholder in both companies. Presumably, as Dealscape suggested last month, EA could skirt Take-Two's board and primarily court the two company's shared shareholders, which together controlled almost a third of Take-Two's shares as of Dec. 31. Now, the remaining large shareholders of the two companies control less than 20% of Take-Two, thereby bolstering the company's ability to defend against EA's possible hostile bid.
Additionally, Take-Two's largest shareholder, Oppenheimer Funds, cut in half its 23% stake in the company. Last year, when Zelnick and a group of activist hedge funds challenged Take-Two's management, Oppenheimer provided its support, ultimately helping the group gain control of the company. In light of the selloff, it seems Zelnick may be losing his chief supporter, which could be a positive development for EA.
Additional coverage will come later in The Daily Deal and on TheDeal.com. - Matthew Wurtzel
See story about shareholder suit from Dealbook
See story about shareholder defections from Dealbook
See story about FMR from Reuters
See story about Oppenheimer from Reuters
See related story about Take-Two's severence plan from The Wall Street Journal
See earlier story from Dealscape
See The Deal blog network's full Take-Two coverage
