EA Drops Out of Take Two Takeover Talks

$2 Billion Bid Off the Table

Both Electronic Arts and Take Two Interactive made it official over the weekend–a buyout of T2 is not going to happen.

EA has confirmed it has terminated discussions regarding a buyout.  The company offered T2 $26 a share, and then $25.74 a share for an acquisition.  Take Two stock currently sits at $21.89 a share and is expected to drop today.

This conclusion has followed a long winding road.  Earlier in the year EA announced it would bid to take over T2, which the latter company’s stockholder’s rejected.  Once that occurred, EA made a move toward a hostile bid, with continuous extensions and delays.   Once the US Federal Trade Commission cleared the way for an acquisition, the two entered private talks.

We’ve heard that there were two problems complicating the matters.  One may have been the slumping sales of the once record breaking Grand Theft Auto IV. The second may have been unreasonable terms on IP, including singing an agreement which concedes EA does not own the rights to those properties, that Take Two was attempting to push on EA.

EA’s statement on the matter tries to look toward the future:

Electronic Arts Inc. (“EA”) (NASDAQ:ERTS) today announced that while EA continues to have a high regard for Take-Two’s creative teams and products, after careful consideration, including a management presentation and review of other due diligence materials provided by Take-Two Interactive Software Inc. (“Take-Two”) (NASDAQ:TTWO), EA has decided not to make a proposal to acquire Take-Two and has terminated discussions with Take-Two.

John Riccitiello, Chief Executive Officer of EA, said: “EA is tracking toward a record breaking year. We’re launching 15 new games including award-winners like SPORE, Dead Space and Mirror’s Edge, great new titles from the Sims, new family titles with Hasbro, and the highest quality slate of EA SPORTS titles on this generation of consoles. We’re also expanding beyond our core business with a series of direct-to-consumer launches including Warhammer Online.”

Take Two’s statement, meanwhile, reaffirms the company’s commitment to stockholders:

Take-Two Interactive Software, Inc. (NASDAQ:TTWO) today responded to Electronic Arts Inc.’s (NASDAQ:ERTS) announcement that it does not intend to pursue an acquisition of Take-Two at this time.

Strauss Zelnick, Chairman of the Board of Take-Two, commented, “We remain focused on creating value for our stockholders and our consumers. This has been our goal since EA launched its conditional and unsolicited bid six months ago, a bid which was repeatedly rejected by our stockholders. As part of that commitment, we remain actively engaged in discussions with other parties in the context of our formal process to consider strategic alternatives. We’re especially proud of the success we’ve enjoyed over the past eighteen months and we remain confident in our ability to generate value for stockholders.”

“Take-Two’s business has continued to strengthen since the time EA first made its offer. We have delivered terrific products to our consumers and we’ve been rewarded with very strong financial performance. We have an exciting future ahead of us, powered by our profitability, a significant cash position, the absence of debt, an undrawn credit facility and a terrific lineup of games. We are confident in the unique value of our business given our strong position in what is a growing and dynamic industry,” said Ben Feder, Chief Executive Officer of Take-Two.

So, aside from what is suspected to be at least a moderate drop in both companies’ stock today on Wall Street (and perhaps beyond), stick a fork in this drama…it’s done.