Investor: EA's offer for Take-Two undervalued

By Reuters

Published: February 25, 2008, 4:56 PM PST

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Video game giant Electronic Arts's offer of $26 a share for Take-Two Interactive Software undervalues the company, and shareholders are unlikely to sell at that price, an investor who owns about 5 percent of Take-Two said on Monday.

"We see Take-Two valued at around $33 a share," said Wiley Reed, a portfolio manager at Denver Investment Advisors.

He also said he expects Electronic Arts to raise its offer before the April 29 release of Take-Two's blockbuster game Grand Theft Auto 4.

"This deal is going to be super-accretive to EA...and we definitely think EA can pay up a bit more here," Reed said. "We're looking for a 33-type number."

EA made an unsolicited all-cash $1.9 billion offer for Take-Two public on Sunday. Take-Two rejected the offer as "inadequate" and accused EA of trying to scoop up a company in turnaround just before the publication of its next hit, GTA 4.

Take-Two shares rose more than 55 percent in early afternoon trade on Monday, while EA shares were down 5.5 percent.

Analysts said a combination of the two makes strategic sense, and expect the deal to go through at a higher offer.

"Given the strategic sense of the combination and the compelling potential for the deal to be accretive to EA shareholders at a higher price, we believe there is a good chance this deal could get done at a higher price than the $26 current offer," Cowen and Company analyst Doug Creutz said in a note to clients.

But Take-Two shares could touch $33 even if EA walks away from the offer, Reed said.

"We think GTA 4 is going to show how powerful this brand is. The stock, on fundamental earnings power, will propel Take-Two to $33 even if Arts doesn't buy it," he said.

Story Copyright © 2008 Reuters Limited. All rights reserved.

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