Is Take-Two Entertaining Other Suitors?

Shares of Take-Two Interactive Software Inc.(TTWO) were trading 1.5% higher at $26.40 early in Friday's session, aided in part by information the video game maker disclosed in a regulatory filing late Thursday. Take-Two said it has received "informal indications of interest" about a business combination since Electronic Arts Inc.(ERTS) made its $1.9 billion offer public last weekend. However, the company said it hasn't received any written offers or engaged in any "substantive discussions" with any party, including EA.

In a research note Friday, Cowen & Co. analyst Doug Creutz writes that a competitive bid is "unlikely," and he still expects EA to acquire Take-Two, though at a higher price. Nevertheless, Creutz downgraded the stock from outperform to neutral, claiming that an uncertain near-term outlook and limited near-term upside make this a good time to take profits in the stock.

Though investors are holding out hope for another bidder to emerge and perhaps start a bidding war for Take-Two, comments from Viacom Inc. (VIA) CEO Philippe Dauman suggest his company won't get involved. Dauman said he doesn''t "anticipate participating in the battle between the pure game companies, who are interested in building up their scope."

Creutz's math shows EA could pay as much as $32 a share and still end up with a deal that is accretive to earnings, and he places a 40% probability that Take-Two accepts a bid from EA at between $30 and $32 a share. He puts only a 20% probability on Take-Two accepting the current $26 bid, a 20% probability it accepts a bid between $27 and $29 a share and a 20% chance that EA walks. - David Shabelman

See Feb. 28 regulatory filing from Take-Two
See Feb. 28 post from Silicon Alley Insider
See Feb. 27 story from Tech Confidential