Monday, February 25, 2008


I have mentioned many times in past posts that on the corporate level, Take-Two is "snakey." SEC investigations, highly-criticized accounting practices--every time you open up a door, a body seems to fall out.

So it should come as absolutely no surprise that there was slime afoot after EA made their offer. Herb Greenberg has the details:
According to an 8-K filing with the SEC, on February 14 (coincidentally the day before rejecting EA’s first offer, which had been made on February 6) Take-Two proposed several changes to its management deal with ZelnickMedia, whose top execs run Take-Two.

They include:
–Boosting ZelnickMedia’s monthly pay to $208,333 from $62,500 per month.
–Boosting the annual bonus to $2.5 million from $750,000.
–A grant of 600,000 shares of restricted stock that will vest over three years unless the company is acquired, in which case they’ll vest immediately.

This is where it gets good, and I’m somewhat paraphrasing from the filings:
The shares won’t vest immediately if, prior to the company’s annual meeting, which is expected to be before April 1, the Company received a bona fide indication of interest in, or offer to enter into, a business combination (which it did); the offer specifies, with some degree of particularity, the material terms (which it may have) and (my favorite) the offer’s existence hasn’t been publicly disclosed or confirmed by either company before Take-Two’s annual meeting. (Oops, definitely happened.)

That’s right: Take-Two received a rich and serious offer from a substantial company. It didn’t disclose the offer, and hoped to keep it secret until at least after the annual meeting, when investors might have challenged the compensation package and attempts by the company to block the deal. Then, in a public filing, Take-Two in effect threatened EA not to make the offer public by giving ZelnickMedia a chance to enrich itself, at the expense of shareholders, by granting restricted stock that will vest immediately if EA made the deal public.

Maybe I'm crazy, but I don't see how paying a 60% premium over the current stock price for Take-Two "undervalues" anything. And beyond that, EA accountants will have to wear hazmat suits when they look at the books.

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