EA and Take-Two Spin GTA IV’s Success Two Different Ways
We know that Electronic Arts was likely trying to take advantage of the launch of Grand Theft Auto IV with the timing of its acquisition attempts. We know that Take-Two was holding off so that they could take advantage of the higher stock values that would undoubtedly come when GTA IV launched. Now that Take-Two’s stock has risen to $26.63, which is slightly higher than the $26 offer EA had made, Take-Two chairman Strauss Zelnick said in a statement that the increase “vindicates our strategy of waiting until the launch with regard to EA’s offer.”
On the other hand, EA’s Jeff Brown doesn’t believe the change is unexpected and doesn’t really make a difference in his company’s offer to acquire Take-Two. He explained, “We’ve seen a share price above and below our offer and it doesn’t change anything. All of that was factored into our offer of $2 billion.”
A New York Times story infers the two different effects that the increase could have on negotiations between the two companies. Both of them seem quite realistic, so it’s difficult to make an accurate prediction about which way things will turn out.
On one hand, the relatively modest increase in Take-Two’s shares could prompt Electronic Arts and Take-Two to act quickly. Take-Two would theoretically do so because it’s not sure how much more it can expect shares to rise in the short term, and would do so because Electronic Arts can justify to its own shareholders a price increase, given that its current offer is below market.
On the other hand, the increase in Take-Two’s stock could serve to greatly prolong talk of an acquisition. Take-Two might feel the market is just beginning to validate its business and that the stock is only just starting to rise. But Electronic Arts could be intent on sticking with its price and feel that the longer it waits, the more the enthusiasm spawned by GTA IV’s introduction will wear off.
I remain hopeful that Take-Two withstands EA’s attempts, if only to save the NBA 2K series. EA murdered my favorite football franchise, and I’m not going to be pleased if they do the same to my favorite basketball franchise.