24.02.2008 19:00:00
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Electronic Arts Proposes to Acquire Take-Two Interactive Software for $26 Per Share in Cash, or Approximately $2.0 Billion
Electronic Arts Inc. ("EA”)
(NASDAQ: ERTS) today announced that it has proposed to acquire Take-Two
Interactive Software, Inc. ("Take-Two”)
(NASDAQ: TTWO) in an all-cash merger valued at approximately $2.0
billion.
EA’s proposal of $26 per share in cash
represents a premium of 64 percent over Take-Two’s
closing stock price on Feb. 15th, the last
trading day before EA sent its revised proposal to Take-Two, and a 63
percent premium over Take-Two’s 30-day
trailing average price over the thirty trading days ending on that date.
EA’s proposal was contained in a letter sent
on Feb. 19th by EA Chief Executive Officer John
Riccitiello to Strauss Zelnick, Executive Chairman of the Board of
Directors of Take-Two. The Take-Two Board’s
subsequent rejection of the EA proposal led to EA’s
decision to release the letter and bring its proposal to the attention
of all Take-Two shareholders.
Mr. Riccitiello said today: "Our all-cash
proposal is a unique opportunity for Take-Two shareholders to realize
immediate value at a substantial premium, while creating long-term value
for EA shareholders. Take-Two’s game
designers would also benefit from EA’s
financial resources, stable, game-focused management team, and strong
global publishing capabilities.”
The EA letter warned that further Take-Two delay in accepting EA’s
proposal could prevent Take-Two’s
shareholders and other constituents from realizing its benefits. "There
can be no certainty that in the future EA or any other buyer would pay
the same high premium we are offering today,”
Mr. Riccitiello wrote. The letter added that timely completion of the
proposed transaction would allow EA’s strong
publishing and distribution network to positively impact the ongoing
post-launch sales of GTA IV and support the new Take-Two titles
scheduled for launch later in the year and during the holiday selling
season.
As noted in EA’s Feb. 19th
letter, EA’s proposal is not conditioned on
any financing requirement. It is, however, subject to certain customary
conditions as set forth in the letter. EA’s
$26 per share proposal is based on the current equity capitalization of
Take-Two. Although EA indicated in the letter that its proposal was
subject to negotiations commencing by Feb. 22nd,
EA intends to keep its proposal open for the present to give Take-Two’s
shareholders and Board of Directors further time to consider it.
The full text of EA’s letter to Take-Two
follows:
February 19, 2008
Mr. Strauss Zelnick
Executive Chairman of the Board of Directors
Take-Two Interactive Software, Inc.
622 Broadway
New York, NY 10012
Dear Strauss:
Thank you for your letter of February 15, 2008. While I appreciate its
courteous tone and value our ongoing dialogue, I am disappointed that
you have rejected Electronic Arts Inc.’s ("EA’s”)
$25 per share cash offer to acquire Take-Two Interactive Software, Inc. ("Take-Two”)
and declined to engage in the friendly negotiations we proposed. We
continue to believe that an acquisition of Take-Two by EA is in the best
interests of your shareholders, employees and other constituents, and we
remain interested in acquiring Take-Two. So, to further demonstrate our
seriousness and encourage you to move forward now, I am writing to
increase EA’s offer to acquire all of the
outstanding shares of Take-Two to $26 per share in cash. This offer is
subject to Take-Two agreeing by February 22, 2008 to commence
negotiation of a definitive merger agreement and to permit EA to
commence a limited due diligence review of Take-Two.
Our revised all-cash offer represents a 64% premium over Take-Two’s
most recent closing price and a 63% premium over Take-Two’s
30-day trailing average price (based on prices as of market close on
Friday, February 15th). We believe our offer
represents a unique and compelling opportunity for Take-Two shareholders
to maximize the value of their investment in the company, with
materially lower risk than if Take-Two proceeds on a stand-alone basis.
We also believe that the transaction we are proposing represents a
uniquely attractive opportunity for Take-Two’s
creative teams and key employees. EA is a diversified leader with
well-established franchises and proven intellectual properties, global
reach, and significant financial resources. I know we both agree that
Take-Two’s talented creative teams deserve a
permanent home within a stable and growing publisher that provides these
teams an environment to do what they do best –
create great games. EA is organized in a four-label model that provides
our creative teams the autonomy they need to fully realize their
creative ambitions, while also providing a stable and supportive
corporate and publishing infrastructure which allows them to best
address the global marketplace. We have the resources to make the
significant investments in technology and infrastructure needed for the
most creative and innovative games in the industry. In short, a
combination with EA would provide Take-Two’s
studios and employees a combination of the right resources for
investment and global reach, and the right environment to do their best
work.
We believe that Take-Two’s shareholders would
not be well-served by any further delay in negotiating and completing
the proposed merger. While the videogame industry remains an attractive,
high-growth business, the challenges and risks in the business are
escalating, and the need for scale is becoming more pronounced. Despite
steps taken since March 2007, Take-Two remains dependent on a limited
number of titles, and has limited capital resources. In addition,
Take-Two faces ongoing financial, legal and operating issues and a very
intense competitive environment. Given these factors, we believe it will
be increasingly difficult for Take-Two to create sustainable shareholder
value and that Take-Two remains exposed to considerable risk of value
loss.
We also believe that any delay in this proposed transaction works
against the interest of Take-Two’s
shareholders, because:
There can be no certainty that in the future EA or any other buyer
would pay the same high premium we are offering today. We place
significant value on the ability to close the transaction relatively
quickly so that EA’s strong publishing and
distribution network, including our global packaged goods, online and
wireless publishing organizations, can positively impact the catalogue
sales of GTA IV and also the launch and sale of titles released later
this year. We want to work with you and your team to complete the
transaction in time to begin realizing its significant marketplace
benefits in advance of this year’s holiday
selling season.
We believe Take-Two’s current share price
already reflects investor expectations for a strong release of GTA IV
as well as the longer-term issues that Take-Two faces. Once GTA IV
ships, Take-Two will again be dependent on less-popular titles and
face increasing challenges to compete with larger and
better-capitalized competitors.
With GTA IV shipping on April 29, development on this important title
must now be essentially complete. We believe now is the right time to
complete a transaction with minimal disruption for Take-Two.
We also believe the transaction we are proposing will create value for EA’s
shareholders. In addition to the top-line benefits noted above, we can
achieve bottom-line benefits by combining Take-Two’s
and EA’s corporate and publishing
infrastructures and by optimally supporting Take-Two’s
creative teams and intellectual properties in EA’s
decentralized label structure.
Considerable thought, time and resources have been put forth in
developing this offer, and our Board of Directors unanimously supports
it. Our offer is not conditioned on any financing requirement. It is
subject to the satisfactory completion of a due diligence review of
Take-Two, the negotiation and execution of mutually acceptable
definitive transaction agreements, and the satisfaction of customary
conditions to be set forth in such agreements. We are prepared to move
forward immediately with formal due diligence and the negotiation and
execution of a definitive merger agreement and believe that with
adequate access to the necessary information and people, we can complete
both in approximately two weeks. We believe that our due diligence
review can be completed with minimal disruption, requiring only limited
access to a small number of senior executives of Take-Two and its legal,
accounting and financial advisors. We also have prepared a draft merger
agreement that we can forward to you immediately.
Our strong preference is to conduct a private negotiation. If you are
unwilling to proceed on that basis, however, we may pursue other means,
including the public disclosure of this letter, to bring our offer and
the compelling value it represents to the attention of Take-Two’s
shareholders.
I am available to meet and discuss any and all aspects of this proposal
with you and your Board. Again, we believe this proposal represents a
unique opportunity to maximize value for Take-Two’s
shareholders, and that the combined enterprise would be extraordinarily
well positioned to build value for our respective customers, employees,
developers and other business partners. We hope that you and your Board
share our enthusiasm, and we look forward to hearing back from you by
February 22.
Sincerely,
John Riccitiello
Chief Executive Officer
Conference Call
Electronic Arts will host a conference call on Monday, February 25, 2008 at 5:00 am PT (8:00 am ET) to discuss its proposal to acquire
Take-Two Interactive and may disclose other material developments
affecting its business and/or financial performance. Listeners may
access the conference call live through the following dial-in number:
(877) 795-3647, access code 220497, or via webcast at http://www.eatake2.com.
A dial-in replay of the conference call will be provided shortly after
the call ends and remain available until March 3, 2008 at (719)
457-0820, access code 220497. A webcast archive of the conference call
will be available shortly after the call ends at http://www.eatake2.com.
About Electronic Arts
Electronic Arts Inc. (EA), headquartered in Redwood City, California, is
the world's leading interactive entertainment software company. Founded
in 1982, the company develops, publishes, and distributes interactive
software worldwide for video game systems, personal computers, cellular
handsets and the Internet. Electronic Arts markets its products under
four brand names: EA SPORTS™, EA™,
EA SPORTS BIG™ and POGO™.
In fiscal 2007, EA posted revenue of $3.09 billion and had 24 titles
that sold more than one million copies. EA's homepage and online game
site is www.ea.com. More information
about EA's products and full text of press releases can be found on the
Internet at http://info.ea.com. For
more information about EA’s proposal to
acquire Take-Two, please visit http://www.eatake2.com.
Additional Information and Where to Find It
This communication is for informational purposes only and does not
constitute an offer to buy any securities or a solicitation of any vote
or approval or a solicitation of an offer to sell any securities. This
material is not a substitute for the proxy statement Take-Two would file
with the SEC if an agreement between EA and Take-Two is reached or any
other documents which EA may file with the SEC and send to Take-Two
stockholders in connection with the proposed transaction. INVESTORS AND
SECURITY HOLDERS OF TAKE-TWO ARE URGED TO READ ANY SUCH DOCUMENTS FILED
WITH THE SEC CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
TRANSACTION.
Investors and security holders will be able to obtain free copies of any
documents filed with the SEC through the web site maintained by the SEC
at http://www.sec.gov. Free copies of
any documents filed by EA with the SEC can also be obtained by directing
a request to EA, 209 Redwood Shores Parkway, Redwood City, CA 94065,
telephone: (650) 628-1500.
EA and its directors and executive officers and other persons may be
deemed to be participants in the solicitation of proxies in respect of
the proposed transaction. Information regarding EA’s
directors and executive officers is available in its Annual Report on
Form 10-K for the year ended March 31, 2007, which was filed with the
SEC on May 30, 2007, its proxy statement for its 2007 annual meeting of
shareholders, which was filed with the SEC on June 20, 2007, and Forms
8-K, which were filed with the SEC on June 6, 2007 and July 17, 2007.
Other information regarding the participants in a proxy solicitation and
a description of their direct and indirect interests, by security
holdings or otherwise, will be contained in any proxy statement filed in
connection with the proposed transaction.
Forward-Looking Statements
Some statements set forth in this press release, including those
regarding EA’s proposal to acquire Take-Two
and the expected impact of the acquisition on EA’s
strategic and operational plans and financial results, contain
forward-looking statements that are subject to change. Statements
including words such as "anticipate", "believe", "estimate”
or "expect" and statements in the future tense are forward-looking
statements. These forward-looking statements are subject to risks and
uncertainties that could cause actual events or actual future results to
differ materially from the expectations set forth in the forward-looking
statements. Some of the factors which could cause results to differ
materially from the expectations expressed in these forward-looking
statements include the following: the possibility that EA’s
proposal to acquire Take-Two will be rejected by Take-Two’s
board of directors or shareholders; the possibility that, even if EA’s
proposal is accepted, the transaction will not close or that the closing
may be delayed; the effect of the announcement of the proposal on EA’s
and Take-Two’s strategic relationships,
operating results and business generally, including the ability to
retain key employees; EA’s ability to
successfully integrate Take-Two’s operations
and employees; general economic conditions; and other factors described
in EA’s SEC filings (including EA’s
Annual Report on Form 10-K for the year ended March 31, 2007 and
Quarterly Report on Form 10-Q for the quarter ended December 31, 2007).
If any of these risks or uncertainties materializes, the proposal may
not be accepted, the acquisition may not be consummated, the potential
benefits of the acquisition may not be realized, EA’s
and/or Take-Two’s operating results and
financial performance could suffer, and actual results could differ
materially from the expectations described in these forward-looking
statements. All information in this press release is as of February 24,
2008. EA undertakes no duty to publicly update any forward-looking
statement, whether as a result of new information, future developments
or otherwise.
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