A Chance For Electronic Arts (ERTS) To Walk On Take-Two (TTWO)

Media

Published: May 19, 2008 5:12 am

It is about the time that Electronic Arts (ERTS) is expected to extend its hostile bid of Take-Two Interactive (TTWO). Take-Two has argued that it is worth much more than the EA offer. Two things would say that the argument is not true.

First, although the new Take-Two "Grand Theft Auto IV" video game launch was extraordinarily successful, it failed to move the company’s stock up. Second, no company other than EA has offered a dime for the company. That may be because Take-Two’s recent earnings have been lackluster. It also may arise from the fact that very few companies can get the kind of economies of scale that EA can get from buying another video game company.

All of this should convince the EA management that its best bet is to do what Microsoft (MSFT) did with Yahoo! (YHOO). Redmond simply walked away and watched the stock of its target fall. Then, lawyers and raiders crawled all over the company.

Take-Two trades at $27 now, very near its 52-week high. If EA does not extend the date for its offer, it may even get Take-Two for less than that.

Douglas A. McIntyre

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