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THQ buys more time in WWE negotiation

Publisher likely to settle with Jakks as troubled partnership looks for an end

THQ has announced that the World Wrestling Federation has extended the deadline for renewing its videogame licence until the end of this year, as the row between the publisher and joint venture partner Jakks Pacific goes on.

According to Wedbush Morgan analyst Michael Pachter the most likely outcome is that THQ will pay off Jakks in order to be able to renegotiate the license on its own - something it's not currently able to do under the terms of its JV deal.

Pachter explains: "The WWE license is between WWE and a joint venture between Jakks Pacific and THQ. The JV is a legal entity, and neither Jakks nor THQ can enter into a new contract with WWE on their own. Jakks and THQ have sued one another, alleging several breaches.

"The relevant issue involves whether THQ can unilaterally terminate the joint venture, so that it can enter into a license deal with WWE on its own. Jakks said in a counterclaim that a) THQ cannot terminate the JV unilaterally and b) even if the JV terminates, THQ is contractually bound to not produce WWE games for 12 months after the termination.

"THQ counterclaimed that a) it can terminate unilaterally and b) it doesn't have to honour the 12-month non-compete upon termination. On balance, we think that THQ can unilaterally terminate the JV, but do not think that THQ can unilaterally void the non-compete clause."

He goes on to conclude that a pay off is the most likely resolution to the matter, and that a deal will be made in the next two months.

In tough market conditions yesterday, THQ's share price fell by 5.8 per cent to USD 5.23.

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Phil Elliott

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