Take-Two sinks after EA says it won't buy company

By: AP
By: AP

NEW YORK (AP) -- Now that a potential buyer has walked away, the video game publisher behind the popular "Grand Theft Auto" series could remain an independent company for the foreseeable future.

Analysts who follow Take-Two Interactive Software Inc. seemed to agree Monday it is unlikely that another serious suitor will come forward - especially one that would be willing to offer as much as larger rival Electronic Arts Inc. did before abandoning talks over the weekend.

Instead, it is more likely that EA will return with another offer, wrote Brent Thill, an analyst with Citi Investment Research, in a note to investors.

Take-Two's stock plunged $5, 23 percent, to $16.89 in afternoon trading. That is slightly below the price the shares had on Feb. 22, the last trading day before EA announced it had offered $26 per share for Take-Two.

Names of other possible buyers - such as France's Ubisoft Entertainment SA - have been floated, and Take-Two itself says it continues to talk with other parties. But no company besides EA, whose bid amounted to $2 billion, has made a public offer.

UBS analyst Ben Schachter called Ubisoft a "logical buyer," while traditional media companies, as well as Asian video game publishers, could also be interested. But, the analyst added, those other companies are unlikely to even match, much less outbid, EA's offer, given that none would be able to benefit from Take-Two's sports franchise, which is not profitable. EA, the publisher of the popular "Madden NFL" football series, dominates the sports game genre, and a combination with Take-Two's sports business would have built on its status as a powerhouse.

Ben Feder, Take-Two's chief executive, said in an interview Monday the company is "very, very happy to stay independent."

"Without question Take-Two can grow as a standalone company," he said.

Analysts were quick to point out that Take-Two is not in distress.

The company "has one of the most successful proprietary game franchises in the industry, is profitable, has no debt," wrote Daniel Ernst, an analyst with Soleil Securities, in a note to investors.

However, some analysts wonder whether Take-Two will be able to renew a contract with key employees at Rockstar Games, the development studio behind "Grand Theft Auto," Take-Two's most lucrative game series and its main source of revenue. A three-year contract with brothers Sam and Dan Houser, who head Rockstar, expires in February.

"We question whether Take-Two can retain them, and if so, at what cost," wrote Wedbush Morgan's Michael Pachter in a client note.

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