Take Two Stocks Decline on Sour EA Deal
A volatile stock market driven by woes of Lehman Brothers and other major financial institutions may be driving a massive sell-off this morning, but Take Two’s problems today are a direct result of a a long standing offer being taken off the table. On Sunday Electronic Arts announced that it was pulling $2 billion offer to buy out Take-Two. Today that news is taking effect, with Take Two shares losing $5.91 in early morning trading. That is a 26 percent decline in only a few hours and it is fueled by investors doing exactly what EA has done: moving on. The stock as of this writing is at $15.98.
That price is well below $17.36 - what the stock was being traded at in February prior to EA’s offer to buy the company.
While Take Two has been saying that other publishers are engaged with the company to possibly buy it, many analyst don’t believe that to be the case. In a MarketWatch report, Citigroup analyst Brent Thill told his clients in a note this a morning that “Despite comments from Take-Two that it remains engaged with other parties about ’strategic alternatives,’ we don’t believe other bidders will emerge at this juncture.”
He also theorizes that EA may found some serious problems with Take-Two’s release pipeline for 2009 and may have had concerns about having to resign Rockstar.
“Despite comments from Take-Two that it remains engaged with other parties about ’strategic alternatives,’ we don’t believe other bidders will emerge at this juncture,” Citigroup analyst Brent Thill said in a note to clients.
Thill went on to say that said EA may have found issues with Take-Two’s release pipeline for 2009, as well as concerns about re-signing key development talent at Rockstar Studios.
At the end of the day EA probably thought the deal was not worth what it would have taken to seal the deal - which would have been two or three more dollars per share.
While it is hard to gauge the long term impact (if any) of this deal falling apart, analyst believe Take-Two is in for a season of challenge. We will keep our eye on this story as it continues to develops.
Source: Market Watch
