Posted on February 27, 2008, Chris Zelnick to Get Paid Big if Take-Two is Acquired
I really don’t care for backdoor deals and things that would fall under the umbrella of “unsavory,” so allow me to paint the picture for you with that in mind.
An 8-K filing with the SEC on February 14, Take-Two proposed some changes to its deal with ZelnickMedia, a company owned by Take-Two chairman Strauss Zelnick. Among these changes was a boost in pay for ZelnickMedia (from $62,500 to $208,333 per month), an annual bonus increase (from $750,000 to $2.5 million) and, best of all, a grant of 600,000 shares of restricted stock that will vest over three years – that is, unless, the company is acquired, which would cause the shares to vest immediately.
Herb Greenberg, a self-proclaimed longtime critic of Take-Two, paraphrased the filings with some of his own commentary thrown in:
The shares won’t vest immediately if, prior to the company’s annual meeting, which is expected to be before April 1, the Company received a bona fide indication of interest in, or offer to enter into, a business combination (which it did); the offer specifies, with some degree of particularity, the material terms (which it may have) and (my favorite) the offer’s existence hasn’t been publicly disclosed or confirmed by either company before Take-Two’s annual meeting. (Oops, definitely happened.)
In other words, Take-Two was hoping to keep EA’s offer to purchase the company a secret until after its annual meeting. If the shareholders were to become aware of this new compensation package AND the offer from EA, they almost certainly wouldn’t be pleased.
Greenberg wrote on his Marketwatch blog: “Exercising my right as a columnist, who writes commentary, and who (by way of full disclosure) has been critical of Take-Two for at least five years: That’s beyond absurd. Makes you wonder which shareholders the company puts first.”
And I’d have to agree with him. If this is indeed true, I’d have to say this is rather unsavory – and quite possibly much worse than that.