Expresses to shareholders that the "offer price is inadequate and substantially undervalues the company."
The Wall Street Journal informed us earlier this month that Electronic Arts, making no progress with the Take-Two board, would be proposing the same offer made to the board, directly to the shareholders. This bid valued each share at $26, a 64% premium on the current value of the stock.
Take-Two has responded to EA's offer by asking their shareholders to hold onto their stock. Take Two backed their request with a list of ten key factors detailing why the offer was not good enough. The board detailed in the list that the EA offer is "opportunistic", due to being "timed to take advantage of the upcoming release of Grand Theft Auto IV."
In addition to the stockholder request, Take-Two took their own preventative measures to avoid an EA hostile takeover. A "poison pill" clause was instated to remove control of the company if any one party gained control of 20% of the company. Within the next 180 days, if any one party gains 20% or more of the available Take-Two shares, new shares are to automatically be created to dilute the percentage of shares controlled by that one party. Along with the "poison pill" plan, a severance package plan was set up for executives if termination were to occur following takeover. Presumably, this would create a higher cost for EA to gain control of the company.
Senior analyst for Wedbush Morgan, Michael Pachter, weighed in on the situation. He expressed that Take-Two's efforts to push the hostile takeover past the release of Grand Theft Auto IV is a mistake and believes that negotiating a friendly takeover before the release of the game will net them a better value on the price of their stock. He also expressed that Take-Two is foolish to believe that there will be another suitor willing to pay more than the offer already presented by EA.
