Take Two Bets on Grand Theft Auto IV to Steal Debut Records

Video game maker Take Two Interactive (TTWO) has been fighting off a $2 billion dollar acquisition bid by rival video game publisher Electronic Arts (ERTS) and pushing back talks until the latest in its blockbuster Grand Theft Auto franchise comes out on April 29th.

And now we know why. The fourth in the series received rave reviews and is set to break records and bring in $400 million dollars in its first week of sales. That won't only be the biggest video game debut ever, it'll also likely be the biggest opening week for ANY entertainment product.

Take Two hopes the release will boost the company's stock price, justifying its advice to shareholders to reject Electronic Arts' $26-per-share bid, initially a 64 percent premium to the company's stock.

Why does Electronic Arts want Take Two? It's not just about the Grand Theft Auto franchise. Take Two and EA are the only two companies that make sports-related video games. From a competitive perspective, EA doesn't want a rival that might invest more in those sports games to snag Take Two and the licenses it has nailed down.

The big rival is Activision (ATVI), which in December acquired Vivendi Games to become Activision Blizzard. But the CEO of Activision, Bobby Kotick says he's not interested in buying Take Two.

So can Take Two use the boffo results of this upcoming game as leverage to get a higher offer? With no other offers on the table, Electronic Arts has little reason to increase its bid. The only reason EA might do that would be to make this deal move forward quickly.

On Thursday afternoon, in New York City, the Take Two board is holding its annual shareholder meeting. On the agenda are eight members up for re-election. But more than anything, you can bet the meeting will be buzzing about this EA offer and whether there are, or will be, any other bids on the table.

Comments

[gaucho420]

Isn't this almost a word for word copy of a CNN/Money article or Associated Press article? How does this qualify as a separate article from seekingalpha?

Not to be rude, but in my opinion this article borders on plagiarism. I read, almost word for word this analysis somewhere else yesterday.

[gaucho420]

My apologies, its the same author! I'm an idiot!

[gaucho420]

I will add that in the past three days, TTWO stock has had an unexplained surge at the end of the day. This is the same pattern that happened prior to the EA announcement to buy out TTWO. If you go back to the charts the week priot to the original announcement, you will see the same buy pattern at the end of the day, where the stock surges for no good reason.

I for one believe we're going to hear something real soon from EA about raising the bid, as the chart movement mirrors that from the previous announcement. I think EA is out there buying share on the open market as we speak.

[User 180722]

Although $26 was a premium to the price at the time of the offer, the stock has been manipulated by short sellers since GTA4 was delayed. It was trading at around $24 six months previously. It also prices TTWO at a DISCOUNT to the rest of the videogame market (when TTWO has the best IP and release schedule in the industry). A fair price would be $35; a fairly generous price would be $40 - 50.