[Posted on April 18, 2008 - 11:51 AM]
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DiggVideo game publisher Electronic Arts Inc. [ERTS] is extending its $2 billion hostile tender offer for Take-Two Interactive Software Inc. [TTWO] to May 16 after Take-Two's shareholders approved a stock incentive plan Thursday night.
EA's $26 per share offer was due to expire Friday. Take-Two shareholders approved an amendment to the company's incentive plan at its annual meeting in New York, which was approved by more than 73% of the votes cast. The plan allows for the issuance of $1.5 million shares of restricted stock to Take-Two's management firm, ZelnickMedia Corp.
That move means the EA offer to Take-Two shareholders of $26 a share is diluted in value, dropping to $25.74. Undeterred, the maker of the popular Grand Theft Auto video games said it amended its offer to reflect a price of $25.74 per share, which still values the deal at $2 billion but takes into consideration additional shares to be issued to ZelnickMedia.
Take-Two responded quickly Friday to EA's deadline extension/price reduction.
"The minuscule number of shares tendered, as well as the strong vote in favor of the proposals presented at our annual meeting, offer indisputable evidence that our stockholders regard our efforts to enhance Take-Two's stockholder value as superior to the EA offer," Take-Two chairman Strauss Zelnick said in a statement.
Zelnick said Friday's offer was just more of the same "highly conditional proposal" put forth by EA a month ago, which Take-Two rejected. The new offer continues to be inadequate, according to Take-Two.
Voting on the amendment was limited to shareholders who owned the stock as of Feb. 19. That's five days before EA went public with its offer. Analysts estimate that more than half of Take-Two's shares have changed hands since leaving control of the outcome with voters who no longer have a stake in the company.
Take-Two's investors are thought to be short-term shareholders unlike institutional investors such as Oppenheimer Funds and FMR LLC, who have substantially reduced their stakes in the company. EA went directly to shareholders with its bid Feb. 24 after Take-Two privately rejected it.
Take-Two has since said it is open to a buyout but wants to wait until April 30, the day after "Grand Theft Auto IV," the latest game in the popular GTA franchise, goes on sale. EA wants to complete the deal sooner so it can get its marketing in place before the holiday season. Redwood City, Calif.-based EA said it continues to believe that the offer price is fair, and that a transaction between Take-Two and EA is the most compelling combination financially, strategically and operationally for all parties.
As of April 17, 6.43 million shares of Take-Two had been tendered in and not withdrawn from the tender offer, EA said. Earlier Thursday, EA said it received a request from the Federal Trade Commission for more information on the buyout proposal. -- Donna Block
