Take-Two Interactive Software Inc., publisher of the popular "Grand Theft Auto" video game series, wanted more time to consider a $2 billion buyout by larger rival Electronic Arts Inc., and it wanted more money. On Friday, half its wish came true.
EA extended by nearly a month its tender offer for Take-Two but lowered the price it's offering for each share of the company to reflect restricted shares granted to its management a day earlier.
The offer, which would have expired at 11:59 p.m. ET Friday, is now good through May 16. As of Thursday, about 6.4 million shares of Take-Two had been tendered, representing roughly 8 percent of Take-Two's outstanding shares.
It's been nearly two months since EA made public its bid to buy Take-Two, and close to five weeks since it took the offer directly to the company's shareholders.
Take-Two has been holding out, refusing to even sit down with EA or any other suitor until April 30, the day after "Grand Theft Auto IV" goes on sale.
EA said it extended the deadline to comply with a second request from the Federal Trade Commission for information about the proposed acquisition. It's the second extension, the first came after Take-Two moved back the date of its annual shareholder meeting by a week.
EA wants to buy Take-Two not just for the GTA franchise, which has sold more than 65 million copies so far, but also for the company's sports business and critically acclaimed titles such as "BioShock."
EA, which has long enjoyed its status as the world's largest game software publisher, will also face a worthy new rival later this year when French media conglomerate Vivendi combines its games unit with Activision Inc., the company behind the successful "Guitar Hero" series. That deal, which will give Vivendi a majority stake in a new company called Activision Blizzard, won European regulatory approval this week.
By adding Take-Two's 2K Sports line to its own label, EA would have a near monopoly on sports video games, and its sheer size and global marketing prowess mean it can boost sales of Take-Two's titles.
But EA doesn't necessarily need Take-Two.
"(This is evident) in their conviction in their existing offer, that they haven't raised the price," said Colin Sebastian, an analyst with Lazard Capital Markets. "But they view it as a good opportunity. If EA thought this was a very necessary component in their growth plan, they would have been more aggressive."
By buying Take-Two, EA is trying to bulk up with more games to sell for the newest generation of gaming consoles from Nintendo, Microsoft and Sony. The video game industry, which hit $18 billion U.S. retail sales last year according to the NPD Group, has shrugged off the economic slump and is growing so fast that by some measures it's outpacing the music industry.
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EA has repeatedly said that timing was key for its offer — which was first made public Feb. 24 — because it wants to put its marketing muscle behind "Grand Theft Auto IV," which goes on sale April 29. Take-Two, however, has called the timing "opportunistic" and has refused to sit down with EA until the day after GTA IV goes on sale.
Owen Mahoney, EA's senior vice president of corporate development, said any further delays, whether caused by regulatory requirements or Take-Two's management, could affect the "value and certainty of the offer."
EA's bid for Take-Two is still valued at about $2 billion. The company said it adjusted the per-share price to $25.74 from $26 to reflect additional shares of restricted stock granted to Take-Two's management. On Thursday, Take-Two shareholders granted ZelnickMedia, the company's management, 1.5 million shares of restricted stock.
Redwood City, Calif.-based EA strongly objected to the stock grant to ZelnickMedia and said it did not reflect the views of shareholders.
That's because Take-Two only allowed shareholders of record as of Feb. 19 to vote at the meeting. That was five days before EA's offer went public, and analysts estimate that more than half of Take-Two's shares have changed hands since.
Chairman Strauss Zelnick said the vote signaled a vote of confidence in Take-Two's management.
"Take-Two's board of directors has maintained from the beginning, and continues to believe, that EA's proposal vastly undervalues our company," he said. "It undervalued the company at $26 per share, and it certainly undervalues Take-Two at $25.74."