Take-Two continues to reject Electronic Arts' 'inadequate' unsolicited tender offer

By Lisa Kerner

Charlotte, N.C., March 26 - Take-Two Interactive Software, Inc.'s board of directors recommends that the company's shareholders not tender any of their shares to Electronic Arts, Inc. following the board's review of Electronic Arts' unsolicited conditional offer.

The $26-per-share tender offer expires at midnight ET on April 11, a prior Electronic Arts news release stated.

Take-Two considers Electronic Arts' offer "inadequate" and not in the best interest of Take-Two shareholders, according to a Take-Two news release.

The board also announced it will explore alternatives to maximize shareholder value, which could include a business combination with third parties or with Electronic Arts, or continuing as an independent company.

In response to Electronic Arts' offer, Take-Two announced the adoption of a stockholders rights agreement to protect stockholders against unsolicited attempts to acquire control of the company.

Under the plan, the rights will become exercisable if a person becomes an "acquiring person" by acquiring 20% or more of the common stock of Take-Two or if a person commences a tender offer that could result in that person owning 20% or more of the common stock of Take-Two, the release said.

The rights agreement will not apply to existing stockholders who own 20% or more of Take-Two's existing common stock, unless and until they acquire an additional 2% of Take-Two's outstanding common stock, Take-Two said.

"We have adopted this short-term stockholders rights agreement in order to guard against a takeover by Electronic Arts at the current, inadequate price," board chairman Strauss Zelnick said in the release.

"The agreement will not, and is not intended to, prevent a takeover of the company on terms that are fair to and in the best interests of all stockholders," Zelnick said.

Take-Two's board said it would be prepared to engage in discussions with third parties, including Electronic Arts, following the release of Take-Two's Grand Theft Auto IV video game on April 29.

Prior to the release of Grand Theft Auto IV, Take-Two is willing to enter into confidentiality agreements and begin preliminary conversations with interested parties.

Zelnick called Electronic Arts' offer "opportunistically timed" to capture the value of the video game launch at stockholders' expense.

Take-Two filed a schedule 14D-9 with the Securities and Exchange Commission further detailing its reasons for rejecting the offer.

According to the filing, the Electronic Arts offer:

• Does not reflect Take-Two's progress made in its revitalization efforts since June 2007;

• Does not reflect Take-Two's potential synergy value that a proposed combination with Electronic Arts would create; and

• Does not properly reflect Take-Two's business, financial condition, current business strategy and future prospects.

Take-Two also announced it has postponed its 2008 annual meeting from April 10 to April 17. The record date for the meeting is April 15.

As previously reported, on Feb. 15 Take-Two turned down Electronic Arts' unsolicited proposal, valued at some $2 billion, to acquire the company for $25 per share and said no to the revised $26-per-share offer, calling the latest bid "inadequate in multiple respects."

Morgan Stanley & Co. Inc. is the dealer manager for the tender offer, and Georgeson Inc. is information agent.

Bear Stearns and Lehman Brothers are acting as financial advisers to Take-Two, and Proskauer Rose LLP is acting as legal adviser.

Electronic Arts, located in Redwood City, Calif., and New York-based Take-Two are interactive entertainment software companies.

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