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Take-Two board has "made a mistake" - Pachter

By Matt Martin

Wed 26 Mar 2008 2:42pm GMT / 10:42am EDT / 7:42am PDT

Analyst does not believe Take-Two will be worth more following the release of Grand Theft Auto IV

Take-Two's continued rebuttal of EA's offer to buy the company for USD 26 per share is a mistake according to Wedbush Morgan, with the analyst firm suggesting that the company will not be worth more following the release of Grand Theft Auto IV next month.

Wedbush believes that Take-Two could have got a higher price from EA had it worked cooperatively instead of dismissing the offer as "inadequate", and that the board has "virtually no chance of finding a better offer."

"In our view, Take-Two's board has made a mistake," said Michael Pachter, analyst at Wedbush Morgan.

"We believe that the company was positioned to extract a higher offer from EA by offering a friendly transaction, and its board chose to continue its adversarial posture. We do not mean to suggest that EA's offer was intended as a friendly one, but note that it started out as such, and EA turned hostile only after its first two friendly offers were summarily rejected.

"We think that Take-Two's position that the company will have greater value after the release of Grand Theft Auto IV is naive at best, and disingenuous at worst. It is inconceivable to us that there are any Take-Two shareholders (current or prospective) who are not aware of the upcoming release of the game, and we do not believe that the game's reviews or first week's sales will ultimately impact the company's valuation in any meaningful way."

Pachter also called Take-Two's bluff with respect to the company suggesting that it has received interest from other third-parties and that it is now willing to sit down with other companies to discuss possible business partnerships.

"The EA offer has been public for 31 days, and we believe the company is not in discussions with any other party," offered Pachter.

"This deal, in our opinion, makes more sense for EA than for any other company, primarily because of the synergies from consolidation of the two companies' sports businesses.

"No other company is in the position to realise those synergies, which we believe are substantial," he added.

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