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New reading: How did Take-Two reject the acquisition by EA?Original

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Recently, Codemasters shareholders have agreed to sell the company to EA for $1.2 billion. This transaction caused a huge sensation, but what is more interesting is that Codemasters had previously agreed to another publisher, Take-Two, to acquire the company for US$980 million, but the latter chose to withdraw after EA “raised the price.”

In the European and American game industry, EA and Take-Two can be regarded as old enemies, and the grievances between the two parties can be traced back to a protracted acquisition battle more than ten years ago.

In early 2008, EA tried to acquire Take-Two. At the time, Take-Two was in deep financial trouble: Although they owned the “GTA” series, they released “R Star Table Tennis”, “The Da Vinci Code” and “Spoof House”. 》And most other games failed to achieve the expected success in the market.



Screenshot of the Da Vinci Code game

In 2006, Take-Two lost $184.9 million. Former CEO Ryan Brant admitted to falsifying financial records and agreed to pay a fine of $7.3 million.

In March 2007, at the Take-Two Annual General Meeting of Shareholders, shareholders voted to elect five new directors, and those directors soon voted to appoint a new chairman: former 20th Century Fox and BMG Entertainment President Ste Strauss Zelnick, also appointed his investment partner Ben Feder as interim CEO.

Zelnik said in a statement that “chaotic corporate management has become a burden on Take-Two.” “Leading the company to turn things around is no easy task, but Ben Fidel and I think that Take-Two will accomplish some great things.”

Just a few months later, Take-Two was involved in an acquisition war. In December 2007, Vivendi announced the acquisition of Activision and merged the two companies into Activision Blizzard. In that year, the total revenue of Vivendi and Activision is expected to reach 3.8 billion US dollars, and EA is worried about this (in 2007, EA’s expected revenue was’only’ US$3.7 billion), because this means that EA is very It may no longer be the largest video game publisher in the world.

In order to maintain the industry’s leading position, EA began to look for acquisition targets, Take-Two is one of them.

In February 2008, EA CEO John Riccitiello (John Riccitiello) wrote a letter to Zernike, telling him that EA was interested in acquiring Take-Two at a price of $25 per share-Take-Two at the time The stock price fluctuates around $16. Lichtino requested a “friendly negotiation” with Zelnik to see if the two sides could reach a deal. Zelnik rejected the offer and stated that Take-Two was not interested in acquisition transactions or negotiations.

Later in the same month, EA decided to speed up the pace, not only increased its offer to $26 per share (valuation of Take-Two reached about $2 billion), but also announced the first public acquisition offer. Lichtino even published an open letter in which he explained to Zernike why selling the company to EA was a good business.

“We believe that our offer provides Take-Two shareholders with a unique and persuasive opportunity, allowing them to reap the greatest value from their investment in the company, and the risk is much lower than that of Take-Two’s continued independent operation. .”

Lichtino also reminded Zernike (and other Take-Two shareholders who read the open letter) that Take-Two is still in an unstable state. “Despite some measures taken since March 2007, Take-Two still relies on a limited number of games, and capital resources are also limited. In addition, in an extremely fierce competitive environment, Take-Two is facing continuous financial , Legal and operational issues. Taking these factors into consideration, we believe it is difficult for Take-Two to create sustainable value for shareholders.”

In an interview with Gamasutra the next day, Ricettino stated that he decided to let everyone know that Zernike rejected EA’s last offer. “We want to attract the attention of shareholders.” He explained, “If the board continues to resist, shareholders will have to bear the loss.”

EA’s plan is very clear: to stimulate Take-Two shareholders to pressure board members to accept the offer.

But Take-Two quickly rejected EA’s second offer, and accused EA of trying to buy the company at a low price before they launched the next hot game. Take-Two plans to release “GTA 4” in a few months. . “We didn’t close the door.” Zernike told Reuters, “We just said, you see, the price (of the acquisition) is not right and the timing is wrong.”

In an interview with GameSpot, Lichtino said that he believes the value of “GTA 4” has been “calculated” in Take-Two’s $16 share price. “According to market analysts’ forecasts, Take-Two will be able to sell 8 to 12 million “GTA 4” within this fiscal year. Frankly speaking, the real question is what other games they have after the release of “GTA”. “

Over time, the relationship between the two companies gradually became tense. Warren Jensen, then the chief financial officer of EA, told CNBC that they would not withdraw the offer, and that if Take-Two was unwilling to negotiate, it would hand the decision to shareholders. When asked if EA is going to initiate a hostile takeover, Jensen replied: “Our goal is to reach a friendly agreement, but this possibility cannot be ruled out.”

At the same time, many industry analysts expressed their views on Take-Two’s rejection of EA’s acquisition offer, and quite a few of them were puzzled. “In our opinion, this offer is more than enough.” Analyst Michael Pachter said, “We admit that Take-Two has several game series with great potential and a group of outstanding creators, but this company has been in succession. Two years of losses…Although the company’s leadership is working hard to reverse the situation, it has never achieved significant results.”

If EA completes the acquisition of Take-Two, it will get more than just the “GTA” series. In 2005, Take-Two acquired Visual Concepts, the developers of “NBA 2K”, “NHL 2K” and “MajorLeague Baseball”-these sports games are widely regarded as EA Sports’s only competitors in the market. Through the acquisition, EA will also make 2K Sports one of the company’s brands, and will help Visual Concepts improve the quality of the game.

In the weeks that followed, Take-Two shareholders became impatient. Some shareholders lost confidence in the company and decided to sell their shares: For example, its largest shareholder Oppenheimer Funds reduced its shareholding in the company from 23% to 11.5%, and the second largest shareholder FMR’s shareholding ratio changed from 23% to 11.5%. 14.7% dropped directly to 2.75%.

Some shareholders took the company to court and filed a lawsuit in Delaware, accusing Take-Two of “violating fiduciary duties” and refusing to give full consideration to EA’s acquisition offer…

EA also quickly took the next step. On March 11, 2008, EA made a direct purchase offer to Take-Two shareholders, which was still $26 per share. If Take-Two is unwilling to sell the company, then EA will buy control from shareholders and acquire Take-Two in this way. “We believe that Take-Two investors will view our takeover offer as the best way to maximize the value of their investment in Take-Two.” Richitino said in a statement.



《GTA 4》

Take-Two asked shareholders not to sell their shares for the time being: “Today, the board of directors recommends that Take-Two shareholders do not take any action for the time being.” Take-Two also promised in its statement that it would consider EA’s Make a quote and tell shareholders their latest thoughts later in the month.

On March 26, Take-Two issued a statement to the company’s shareholders, stating that they are still not interested in being acquired by EA and calling on them not to sell their shares to EA… Take-Two listed in the statement 10 reasons for reluctance to sell the company to EA, including EA’s too low valuation of the company, trying to buy at a low price before the launch of “GTA 4”, EA’s offer with additional conditions, etc.

In order to let EA completely give up, Take-Two also formulated a “poison pill” clause, according to the provisions of the clause, if any single shareholder acquires 20% of the company’s shares in the next 6 months, then Take-Two will issue The new shares dilute their shareholding ratio…Under the persuasion of Take-Two, the shareholders ultimately did not sell their shares to EA.



“Red Dead Redemption: Redemption 2”

In any case, Take-Two finally got through the difficulties, and “GTA 4” was officially released on April 29, 2008 (landing on Xbox 360 and PS3). “GTA 4” has performed better than analysts’ predictions in the market. It sold 8.5 million copies in the first month of its release, and has sold more than 25 million copies so far.

In August 2008, six months after the first offer for Take-Two, John Richtino issued another open letter to Strauss Zellnik, confirming that EA no longer intends to acquire Take-Two. Interestingly, Zernike’s tone in his reply was a bit strange, and he invited EA to “evaluate the company’s strategic options.”

Why does Take-Two’s attitude towards EA seem to have changed? Some people think this has something to do with Take-Two’s stock price. “GTA 4” once pushed Take-Two’s stock price to $27.31, but its stock price soon began to fall. As the stock price continues to fall, Take-Two may be more willing to negotiate with EA than in the past.

But EA seems to have lost interest. In September 2008, EA stated in a statement that “after careful consideration”, the company has terminated the acquisition discussion and will not make any new offers. Zelnik also said: “Since EA made a conditional and unsolicited offer six months ago, this has been our goal. EA’s offer has been rejected by our shareholders time and time again.”

Original translation:
https://www.videogameschronicle.com/features/that-time-when-ea-almost-took-over-grand-theft-auto/

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