Can EA Take Over Take-Two?

May 20, 2008

As Take-Two Interactive rolls out one of the most eagerly anticipated video games of the year, “Grand Theft Auto IV”, the company’s stock price has danced around $26, a share range that EA had previously offered as a bid towards its rival company. This attempted amalgamation has been EA’s crack at regaining dominance in the interactive entertainment industry after the merger of Blizzard and Activision created a commercial giant that effectively dethroned EA as video game king.

Take-Two Interactive’s basis for spurning EA’s offers is because they undervalue Take-Two, and it is becoming more apparent that this response is valid. In a continuously growing industry that has not suffered with domestic economic slow-downs, interactive entertainment companies like Take-Two and EA are in an ideal position because consumers may cut back on luxury food and clothing but still pay premium prices for video games.

Take-Two brand loyalists indicate that EA’s management and product development techniques would detrimentally alter Take-Two’s product lines. Consumers sense that EA’s acquisition of Take-Two would eventually fracture both brands and place Activision Blizzard in a position of market dominance, the converse of EA’s intent.

EA’s best strategy is to reconsider its plans to acquire Take-Two and make sure that a merger would truly benefit both companies’ shareholders, and, of course, the consumer base that is preventing the video game industry from becoming a terminal patient in a suffering economy.

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