Video game software developer Electronic Arts (ERTS) today FINALLY agreed to drop its HOSTILE $2.0 Billion Takeover bid ($25.74/share) for smaller industry peer Take Two Interactive (TTWO). With that move FINALLY out of the way (Take Two has had to reject EA's uncompromising bid as too LOW for 5 times already!!!), I'm thinking Electronic Arts may FINALLY be giving the management of Take Two Interactive some respect by enabling takeover discussions to go the FRIENDLY (as opposed to hostile) route. While some interpret today's development as meaning EA is ready to move on and abandon its bid ALTOGETHER for Take Two...
1.) So be it, I think TTWO can do fine as an independent company given its recent momentum and 'out-year' earnings visibility courtesy of blockbuster successes GTA 4 (TTWO will be selling extra content for the Best Selling video game of ALL TIME later this year) and the COMBO Movie/video game title, BIOSHOCK.
2.) In the scenario that EA leaves the table, I HOPE the shares tank so that I can load up because I truly believe another company (Activision...Viacom...Microsoft...Sony, etc.) will come into the fold and bid on TTWO.
3.) In the event EA leaves the table, who's not to say they don't come back within 3 months, 6 months, one year or 2 years ?
4.) Oh yeah, TTWO has ALREADY casually mentioned its in formal takeover talks with an interested party not named Electronic Arts.
... I do NOT agree (keep up..and make sure you say NOT like Borat). I believe Electronic Arts NEEDS Take Two (with that said...and as subtly hinted above, I should point out that Take Two does NOT need Electronic Arts). EA needs TTWO because there's absolutely NO WAY Electronic Arts makes good on its own recently highlighted Company GROWTH Goals (sales, profits, units, marketshare, etc.) without adding a primetime video game software developer like Take Two. It's quite simple really...EA canNOT grow its video game business fast enough organically to accomplish its goals (the industry doesn't grow on trees...well not for a MATURE $15 Billion video game BEHEMOTH like Electronic Arts anyways)...they need to tap into the power of the All-Mighty ACQUISITION. Sitting on its heals would do nothing but compromise EA's already fragile + less than stellar integrity with shareholders. Bottom line - I continue to be a fan of Take Two Interactive..whether it ends up receiving a higher bid from EA or NOT (say it in that Borat voice again).
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* TRACKING 2008 GTA 4 Sales by Month courtesy NPD (rounded):
APRIL: 2,850,000 units
MAY: 1,310,000 units
JUNE: 396,000 units
JULY: 132,000 units
Full Disclosure: I own shares of TTWO.
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