Electronic Arts Inc. on Monday let its $2-billion hostile buyout offer for Take-Two Interactive Software Inc. expire.
But the video game companies plan to keep discussing a deal that would combine EA, the world's largest game publisher, with the maker of the Grand Theft Auto franchise.
The tender offer would have paid stockholders of New York-based Take-Two $25.74 a share. Redwood City, Calif.-based EA, which makes such games as Madden Football and the Sims, had extended the offer five times.
EA, which launched its bid in March after several friendly takeover attempts, said too much time had lapsed since the offer was made. "Our model assumed that we could integrate Take-Two's products in our holiday portfolio this year," spokesman Jeff Brown said. "We are now at a point where that is no longer possible."
Take-Two's shares dropped $1.09, or 4.4%, to $23.75. EA's shares fell 48 cents to $47.76.
But the deal isn't completely dead. After EA notified Take-Two on Friday of its decision to let its offer expire, Take-Two's board invited EA to a formal meeting -- the first face-to-face discussion between the two companies since EA initiated its tender offer.
EA agreed to the meeting, which has yet to be scheduled. Take-Two is expected to share its confidential business plans, product pipeline and financial projections.
"We welcome EA into our formal process and look forward to demonstrating . . . the significant strides made by Take-Two since they last undertook a detailed review of our business in early 2007," Take-Two Chairman Strauss Zelnick said in a statement.
Zelnick has insisted that Take-Two was worth far more than EA's bid.
"Price had been the key sticking point," UBS Securities analyst Ben Schachter wrote in a research note Monday. He said Take-Two's board members had privately indicated that their company was worth $35 a share or more.
EA didn't budge. "We're hopeful that the diligence [meeting] will support the price of $25.74" a share, Brown said. "However, we have been price disciplined throughout this process and will continue to be so."
Any merger would require the blessing of the Federal Trade Commission, which is scheduled to conclude its antitrust investigation of the deal Thursday.
"There's nothing that leads us to believe the transaction would not be cleared by the FTC," Brown said.