Sunday, September 14, 2008

Take Two and EA Call It Off

The NY Times is reporting the EA/Take-Two courtship is no more:

On top of the credit turmoil this weekend, this is really bad news for Take Two (TTWO). It's going to be interesting to see how far TTWO drops on Monday, and how much ERTS increases. I told the Board at this year's ERTS shareholder meeting the EA/TTWO merger was a fine idea prior to TTWO's numbers being released. Everyone knew the latest release of Grand Theft Auto would do well, which would cause Take Two to demand a far higher premium than its intrinsic value warranted. The simple fact is Take Two's pipeline is weak. Like Pfizer (PFE), Take Two has a great balance sheet, but not much in the way of forward growth. That being said, I expect EA to come back to Take Two when its numbers show a gradual decline in sales, forcing Take Two to be more reasonable. Someone will buy Take Two at some point--as I said before, it's just a matter of who and when.

I sold my Take Two shares on Friday, netting a 2.2% percentage gain in three days. As a trader, sometimes it's better to be lucky than good.

Disclosure: although I do not currently own TTWO shares, I may buy shares in the future.

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