Redwood City, Calif.-based EA proposed to acquire Take-Two for $26 per share in cash, or roughly $2 billion. Take-Two's shares were trading at about $18 Feb. 22 when EA made the offer public, although share prices have since jumped to nearly $28.
New York-based Take-Two's Board of Directors publicly rejected the offer Monday, citing that it undervalues the publisher's "robust and enviable stable of game franchises, exceptional creative talent and strong consumer loyalty." The Board also argued that EA was attempting to take advantage of the upcoming release of "Grand Theft Auto IV," in April. The "Grand Theft Auto" series has sold more than 65 million units to date, making it Take-Two's most profitable franchise.
Strauss Zelnick, executive chairman of Take-Two's Board of Directors, said that the company would not rule out a possible future agreement, provided that EA would be willing to negotiate and "reach common ground on the appropriate value of Take-Two." And those negotiations would not happen until after the launch of "Grand Theft Auto IV."
"Given the great importance of the 'Grand Theft Auto IV' launch to the value of Take-Two, the Board has determined that the only prudent and responsible course for our company and its stockholders is to defer these discussions until immediately after 'Grand Theft Auto IV' is released," Zelnick said.
In the past few years, Take-Two's share prices have been battered by scandals involving pornographic and ultra-violent game content, and games struggling to gain ratings boards approvals in both the U.S and the U.K., as well as SEC charges related to stock backdating.
EA CEO John Riccitello made note of these challenges in his open letter to the Board, stating: "Right now, Take-Two's future is uncertain. Take-Two's creative teams make fantastic games and the company has gotten some good interim support from a group of new corporate leaders. But Take-Two is facing a host of threats and--with or without combination with EA--we believe there is a strong likelihood that the company will be sold in the not-too-distant future."
Zelnick responded by saying that EA's proposal failed to recognize Take-Two's ongoing turnaround efforts. "While we have made substantial progress already, the turnaround of our business which we initiated in June is not yet complete, and we believe its benefits have not been recognized in either our current stock price or in the value of EA's proposal," Zelnick said.
In March 2007, Zelnick took over as Chairman of the Board, while Ben Feder became CEO as part of a major management overhaul--which included the removal of former CEO Paul Eibler and other board members.