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Take-Two rejects EA's bid as 'inadequate'

Board says it's studying alternatives--including an alliance with EA--that it might embrace after the release of Grand Theft Auto IV.

To the surprise of probably no one, Take-Two Interactive Software has rejected Electronic Arts' hostile buyout offer.

In an announcement Wednesday morning, Take-Two said its board of directors and company officers have recommended that shareholders reject EA's bid of $26 a share. The board also said it's developing alternative strategies for possible alliances with third parties, including EA, that would kick in after the April 29 of release of Grand Theft Auto IV.

Take-Two's board noted that "substantive discussions" about possible alliances have yet to occur, although it did emphasize that the company is now open to them. In its statement, the company said it "unanimously determined that the $26-per-share cash offer is inadequate in multiple respects and contrary to the best interests of Take-Two's stockholders."

Among the issues cited by the board:

• EA's offer undervalues Take-Two, especially in light of its 2007 initiative aimed at streamlining operations and cutting costs.

• Take Two's financial advisers, Bear Stearns and Lehman Brothers, objected to the financial terms of the offer, which, Take-Two separately noted, would be taxable for shareholders.

• The timing of EA's unsolicited offer is "opportunistic" in that it is intended to capitalize on the upcoming release of Grand Theft Auto IV, the newest installment in Take-Two's successful video game series.

• EA's offer does not reflect the potential "synergy value" that a combination of the two companies would create, including a larger distribution network, more opportunities to exploit "online, wireless, and other evolving platforms," and reduced administrative costs.

No comment yet from EA.