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Video game publisher Take-Two considers sale

March 20, 2007|From Reuters

Take-Two Interactive Software Inc. said Monday that it was weighing a potential sale of the company and other options, as an investor group seeks control of the video game publisher best known for "Grand Theft Auto."

Shares of Take-Two surged 8%, hitting their highest close since late 2005 and giving the company a market value of more than $1.6 billion.

Take-Two, the third-largest U.S. video game publisher by revenue, has one of the industry's most popular franchises and could draw interest from rivals such as Ubisoft Entertainment, THQ Inc. and Electronic Arts Inc.

But the company has been battered by several years of accounting woes, operational problems, a scandal over hidden sexual content in its games and a string of quarterly losses as it was unable to contain costs.

When asked who might buy Take-Two, Wedbush Morgan Securities Inc. analyst Michael Pachter replied, "Nobody."

A buyer would have to pay heavily to retain the talent behind Take-Two's Rockstar Games studio, maker of the blockbuster "Grand Theft Auto" games, which have generated more than $1 billion in sales.

That would make a deal less attractive, Pachter said. "You'd have to buy off those guys to keep them."

Take-Two said in a statement that it was reviewing alternatives that it could raise with the investor group, which owns 46% of shares and wants to take control of the board and oust Chief Executive Paul Eibeler.

The New York-based company delayed its annual meeting to March 29 from March 23 to review efforts by the investors but said it could not guarantee that any specific proposal would be presented.

The shareholder group includes OppenheimerFunds Inc., S.A.C. Capital Management, Tudor Investment Corp., D.E. Shaw Valence Portfolios and ZelnickMedia Corp.

Analysts have cheered efforts to revamp Take-Two's leadership as the beginning of what they expect would be a complete restructuring.

In February, former Take-Two CEO Ryan Brant pleaded guilty to criminal charges over backdating stock options and settled a civil action brought by the Securities and Exchange Commission. That opened the door for interested parties to take a look at the company.

The stock rose $1.76 on Monday to $22.61.

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