Take-Two Settles FTC Compliance Issues In EA Bid

Illustration for article titled Take-Two Settles FTC Compliance Issues In EA Bid

Take-Two has resolved its issues with the Federal Trade Commission, clearing at least one regulatory obstacle for Electronic Arts' acquisition bid, the company revealed in an FTC filing this morning.

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The U.S. District Court of Washington D.C. had asked Take-Two to show why it wasn't complying with the FTC's broad-ranging information request as it investigates potential antitrust issues for the possible combination, probably regarding the companies' sports portfolios.

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For its part, Take-Two had claimed that complying with the full scope of the FTC's requests would have been too expensive and labor-intensive, and asked for "reasonable limits."

It's now gotten those limits yesterday through an agreement with the FTC, and the investigation will now continue without the need for Take-Two to appear in court. EA had also previously reached an agreement with the FTC that would delay any acquisition attempt until the completion of the investigation - the fact that Take-Two won't have to appear in court should simplify the process quite a bit.

Said Take-Two in a statement, "The Company is pleased that a resolution has been reached that should substantially reduce the economic burden on the Company and focus the inquiry in a way that should minimize the distraction to the Company's employees. The Company intends to continue to cooperate fully with the FTC."

EA's current offer deadlines July 16th, but any acquisition will have to wait until the FTC makes its final determination.

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DISCUSSION

It's not that Take Two doesn't want to sell. It's just that they don't want to sell at under $26 a share. Take Two's board of directors need something more from EA. They can't accept EA's offer of $25.74 a share because then the shareholders will rake the board over the coals because they told everyone to hold out for more.

Also if EA officially walks the stock prices will probably plummet below the 25 dollar mark. Just look at what happened to Yahoo's stock price when Microsoft walked away from their merger talks. That would be even worse from a shareholder's perspective. Any other publisher that Take Two claims have shown interest will have even more leverage because of the sudden price drop and it will be difficult for them to get a price above $26.

EA can probably hold out with this tactic but they know they will need to bump the price. EA also must realize that as long as they show interest, the price of the stock will not move below $26 unless a major Take Two scandal breaks. The question now is, when will EA make move and how much more will they offer at that point? If EA is serious in their statement that this acquisition is purely for holiday sales then the latest they can hold out would probably be sometime in September.

Of course, a lot of this is just my purely speculative opinion.