Videogame Industry
Analysts see no obvious suitors for Take-Two
Auteur : Lisa Baertlein
Du : 31/01/2006
LOS ANGELES, Jan 30 (Reuters) - Video game maker Take-Two Interactive Software Inc. (TTWO.O: Quote, Profile, Research) does not now appear to be an attractive target for an acquisition or a leveraged buyout, Bank of America analyst Gary Cooper said on Monday.
The financially troubled maker of the controversial and blockbuster "Grand Theft Auto" video game series has no obvious suitors, Cooper and Citigroup analyst Elizabeth Osur said in separate notes.
Take-Two, which was forced to pull "Grand Theft Auto: San Andreas" from store shelves last summer after the discovery of undisclosed sex scene that could be "unlocked" with downloaded software, recently has reported a sharp decline in earnings, "material weaknesses" in its recent financial reports and the departure of a key board member -- who signaled that securities regulators had directed inquiries at the company and employees.
Cooper said he does not believe that other video game companies, including Electronic Arts Inc. (ERTS.O: Quote, Profile, Research), Activision Inc. (ATVI.O: Quote, Profile, Research) and THQ Inc. (THQI.O: Quote, Profile, Research), would be interested in the company at the current price of it its shares. The stock has lost 22 percent of its value since Oct. 31, closing at $16.19 on the Nasdaq on Monday.
Entertainment conglomerates, other potential purchasers, appear to have chosen Internet-related industries as a path to growth, Cooper said.
"We do not believe financial buyers would be interested in purchasing (Take-Two)," added Cooper. He said the company's cash production is "inconsistent" and that its cash balance has quickly declined at a time when the overall video game industry is undergoing a technology transition that is whacking sales.
Most of the company's value is in its Rockstar Games subsidiary, the studio responsible for the "Grand Theft Auto" franchise. Cooper said any buyer would have to ensure that Dan and Sam Houser, brothers who helped establish Rockstar and are credited as the creative force there, and other development talent remained at the company.
"Paying a full price (or overpaying) only to lose key members of Rockstar would not be a good deal," Cooper said.
Citigroup's Osur, who has a "hold" rating and an $18 share price target on Take-Two, said the company has a huge amount of asset value that could be unleashed in a break-up, where the value could be closer to $25 or $30 per share.
"We think a public company buyer is unlikely given the bad press surrounding many of Take Two's franchises, but a private buyer could find the assets appealing," Osur said.
Cooper last week cut his rating on Take-Two to "sell" and assigned it a 12-month price target of $12. Analysts' average rating has fallen to "sell" from "outperform" three months ago, according to Reuters Estimates.
The financially troubled maker of the controversial and blockbuster "Grand Theft Auto" video game series has no obvious suitors, Cooper and Citigroup analyst Elizabeth Osur said in separate notes.
Take-Two, which was forced to pull "Grand Theft Auto: San Andreas" from store shelves last summer after the discovery of undisclosed sex scene that could be "unlocked" with downloaded software, recently has reported a sharp decline in earnings, "material weaknesses" in its recent financial reports and the departure of a key board member -- who signaled that securities regulators had directed inquiries at the company and employees.
Cooper said he does not believe that other video game companies, including Electronic Arts Inc. (ERTS.O: Quote, Profile, Research), Activision Inc. (ATVI.O: Quote, Profile, Research) and THQ Inc. (THQI.O: Quote, Profile, Research), would be interested in the company at the current price of it its shares. The stock has lost 22 percent of its value since Oct. 31, closing at $16.19 on the Nasdaq on Monday.
Entertainment conglomerates, other potential purchasers, appear to have chosen Internet-related industries as a path to growth, Cooper said.
"We do not believe financial buyers would be interested in purchasing (Take-Two)," added Cooper. He said the company's cash production is "inconsistent" and that its cash balance has quickly declined at a time when the overall video game industry is undergoing a technology transition that is whacking sales.
Most of the company's value is in its Rockstar Games subsidiary, the studio responsible for the "Grand Theft Auto" franchise. Cooper said any buyer would have to ensure that Dan and Sam Houser, brothers who helped establish Rockstar and are credited as the creative force there, and other development talent remained at the company.
"Paying a full price (or overpaying) only to lose key members of Rockstar would not be a good deal," Cooper said.
Citigroup's Osur, who has a "hold" rating and an $18 share price target on Take-Two, said the company has a huge amount of asset value that could be unleashed in a break-up, where the value could be closer to $25 or $30 per share.
"We think a public company buyer is unlikely given the bad press surrounding many of Take Two's franchises, but a private buyer could find the assets appealing," Osur said.
Cooper last week cut his rating on Take-Two to "sell" and assigned it a 12-month price target of $12. Analysts' average rating has fallen to "sell" from "outperform" three months ago, according to Reuters Estimates.