Phil Elliott
16:35 (BST)
25/02/2008
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Screen Digest: EA will succeed
Size of premium and importance of scaling indicate Take-Two bid will win out
Screen Digest analyst Ed Barton has told GamesIndustry.biz that he believes a number of factors will come into play over the course of the Electronic Arts/Take-Two Interactive negotiations, and taken together they will be successful.
"The size of the premium, the doggedness of EA and Riccitiello, the difficulties Take-Two has experienced in its recent history, the importance of scale in games publishing and, ultimately, the strategic imperatives which strongly indicate that a combined entity will perform better than two separate entities suggest it will [succeed]," he said.
He explained that while at this point the balance of power lies with Take-Two executive chairman Strauss Zelnick, that could shift in EA's favour over time.
"If [Take-Two] can convince its shareholders that it can offer them better prospects in the longer term than taking the money now, it was right to refuse," he replied when asked if the decision taken by Zelnick was the correct one.
"If shareholders remain unconvinced, EA reserves the right to appeal directly to them. It's a very fine balancing act and Strauss Zelnick and his colleagues will be working hard to get a fix on what their shareholders think and how far they can push the process before shareholders start agitating, they begin to lose control and their ability to convince EA to increase its offer begins to diminish."
And Barton was clear about the potential positives that such a move would bring: "It's difficult to think of another company which would benefit as much as EA by acquiring Take-Two," he said.
"Given EA's significant publishing and distribution operations, its strength in broadly similar geographical markets to Take-Two and its proven ability to work its games IP work as hard as anyone in the industry enable it to offer what appears to be a very full premium on Take-Two's share price."
On the question of whether that share price represents good value, he explained that the GTA IV release had been factored into the Take-Two share price for months, but noted other strengths which might not have been.
"Whether the market has priced in some of the less visible bull points for Take-Two (new IPs such as Borderlands and sequels such as Sid Meier's Civilisation Revolution, Mafia 2, increased focus on the non-core gamer, increased commitment to Nintendo platforms, value unlocked from synergies in a major transaction) is another question."
As things stand Take-Two has rejected the EA offer, although it does remain open for the time being, allowing negotiations to remain "friendly".
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