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Electronic Arts Proposes to Acquire Take-Two Interactive Software for $26 Per Share in Cash, or Approximately $2.0 Billion
Proposal Represents 64 Percent Premium to Take-Two's February 15th Closing Price and 63 Percent Premium to Take-Two's Closing Price Over the Previous 30 Days
REDWOOD CITY, Calif. - February 24, 2:00 2008 - 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.
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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 athttp://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.
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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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For more inforamtion contact :
Electronic Arts Inc.
Tricia Gugler, 650-628-7327
Director, Investor Relations
or
Jeff Brown, 650-628-7922
Vice President Corporate Communications
Source: Electronic Arts Inc.
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