EA's Take-Two Buyout Offer Expires Today, Companies Begin Talking 'Strategic Alternatives'

By Chris Faylor, Aug 18, 2008 9:21am PDT Electronic Arts' oft-extended deadline for its hostile takeover of Grand Theft Auto owner Take-Two Interactive Software will expire today, the companies have confirmed.

With the takeover threat no longer looming, EA will sign a confidentiality agreement that will provide it with the "in-depth management presentation" that Take-Two is using in the "formal process to evaluate strategic alternatives" it mentioned back in March.

The owner of multiple successful properties, including Grand Theft Auto, Max Payne, Civilization and BioShock, Take-Two was first presented with EA's unsolicited $2 billion buyout offer in February. It declined the offer, prompting EA to pursue a hostile takeover.

"We are continuing to consider all alternatives that will maximize value to our stockholders," noted Take-Two CEO Ben Feder. "We are engaged in discussions with other parties as part of a formal process to generate greater value and will act quickly to assist EA in moving expeditiously through our process."

Below are letters exchanged between EA CEO John Riccitiello and Take-Two chairman Strauss Zelnick, which further explain the decisions.

August 17, 2008

Mr. John S. Riccitiello
Chief Executive Officer
Electronic Arts Inc.
209 Redwood Shores Parkway
Redwood City, CA 94065

Dear John:

Thank you for your recent expression of interest for Electronic Arts Inc. ("EA") to participate in Take-Two Interactive Software, Inc.'s (the "Company") formal process to evaluate the Company's strategic alternatives. As you know, we have been willing to have EA participate in this process following the successful launch of GTA IV, and we are happy to include EA now.

As I mentioned when we spoke on Friday, our process begins with an in-depth management presentation. The Company has made significant strides since EA first expressed interest in the Company and this presentation includes material non-public information to which you would not otherwise have access, including information relating to our three year product release schedule and management's financial projections. The presentation also includes information about the underlying factors that have driven our strong operational and financial performance. I believe our presentation will enable you to understand better the value of our Company to EA.

Prior to the management presentation, we will only require EA to enter into a confidentiality agreement. The agreement would be limited to provisions required to comply with federal securities laws and to ensure the Company's ability to protect the confidentiality of the information shared with you. I can assure you that this requirement is the same as or more favorable to EA than that which we have employed with all other participants in the process.

We understand that a number of months have passed since you first expressed interest in the Company and, accordingly, we will act quickly to assist you in moving through our process. Once we execute a confidentiality agreement, we are prepared to schedule the management presentation immediately.

With my best personal regards.

Sincerely,

Strauss Zelnick
Executive Chairman of the Board

August 18, 2008

Mr. Strauss Zelnick
Executive Chairman of the Board of Directors
Take-Two Interactive Software, Inc.
622 Broadway
New York, NY 10012

Dear Strauss:

Thank you for taking my call on Friday and for your response letter on August 17, 2008.

As discussed on Friday, given the passage of time, we have to validate the assumptions used in the model to support our offer price of $25.74 per share in cash. In addition, we no longer believe we can integrate Take-Two ahead of the important holiday season. Accordingly, we require due diligence to support a transaction and are therefore letting the tender offer expire tonight. However, we are pleased to accept your offer to review your management presentation as outlined in your letter.

We continue to have great respect for Take-Two's creative teams and products and are hopeful that we can work together to reach a mutually agreed transaction.

Sincerely,

John Riccitiello
Chief Executive Officer

"We welcome EA into our formal process and look forward to demonstrating to their Board the significant strides made by Take-Two since they last undertook a detailed review of our business in early 2007," Zelnick added in press release.

"Our Board remains unwavering in its belief that EA's unsolicited conditional tender offer of $25.74 per share was inadequate and undervalued Take-Two's world-class entertainment franchises and our strong operational and financial performance."

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