Nearly seven months after announcing an unsolicited offer to acquire Take-Two Interactive Software Inc. for $2 billion, Electronic Arts Inc. Sunday dropped the bid for its videogame rival.The offer by EA, launched in February, would have united two of the largest publishers of videogames, with hits such as EA's Madden football and Take-Two's Grand Theft Auto series.
EA had long said it needed to integrate Take-Two's games into its portfolio by the holiday season for its offer of $25.74 a share to make sense. Take-Two's management consistently rejected that offer as too low, especially given the strong performance of Grand Theft Auto IV, which has sold more than 10 million copies since going on sale in April.
EA eventually let its hostile offer for Take-Two expire, but it still seemed possible in August that the two sides might arrive at a deal when EA said it was entering into confidential discussions with Take-Two, during which it had access to non-public information about Take-Two's plans.
EA, Redwood City, Calif., on Sunday said it decided not to make a new offer after those discussions, which included a management presentation and other due-diligence materials. Owen Mahoney, senior vice president of corporate development at EA, declined to say exactly what clinched the company's decision to walk away, but hinted that the inability to get a deal done in time for the holiday was a factor.
"This was never must-have proposition, but we respect their people and products," Mr. Mahoney said. "We don't need Take-Two to make EA successful."
Take-Two said EA's decision would have little impact on its fortunes and that it remains "actively engaged" in discussions with other possible suitors, though the company declined to identify them.
"Take-Two is in terrific shape," said Strauss Zelnick, Take-Two's chairman, in an interview. "Our options are numerous, including remaining independent."
Take-Two shareholders in recent months appeared to be betting that EA would walk away from Take-Two. Its shares closed on Friday at $21.89, 15% lower than EA's last public offer for the company.
EA's Mr. Mahoney said the company would continue to scout for other acquisitions. One area of interest: businesses that allow it to distribute directly to consumers over the Internet, without going through a retailer.
By: Nick Wingfield
Wall Street Journal; September 15, 2008
