February 6, 2006 - Elevation Partners -- the private equity firm which counts among its major investors U2's lead singer Bono -- is reportedly in talks to acquire controversial videogame publisher Take-Two Interactive, according to a report published in yesterday's New York Post.
The Post reported last week that Take-Two was in "serious discussions" with several buyout firms and it appears that Elevation is the leaning candidate to acquire the Grand Theft Auto series publisher. According to the Post, Elevation has partnered with Pequot Capital, a hedge fund and venture capital investor that owns a significant amount of Take-Two's shares.
The deal faces some significant hurdles as Take-Two is currently embroiled in:
- multiple shareholder class action lawsuits over its handling of the "Hot Coffee Affair" and its resulting negative financial impact on the company's earnings and stock price
- a lawsuit filed by the city of Los Angeles for the sale of Grand Theft Auto: San Andreas related to the "Hot Coffee" fiasco
- the fallout over the resignation of the chairman of the company's audit committee due to her "concerns" about the company's accounting and governance issues involving its financial internal controls
- a potential Securities and Exchange Commission (SEC) investigation related to the company's accounting practices
- an Alabama lawsuit that alleges a teenager went on a killing spree due to the influence of the Grand Theft Auto series
- the company is burning through cash at a significant rate
These problems have led many industry analysts to downgrade their opinon of Take-Two's stock and even caused some such as Citigroup's Elizabeth Osur to suggest that the company's "market capitalization is less than the sum value of its various parts" - in other words, Take-Two Interactive is more valuable if broken up into its component assets (its studios) than as a single entity.
This has led many to speculate that the eventual goal of any buyout by a private equity firm such as Elevation would involve eventually spinning-off the company's studios as independent entities.
Elevation Partners had previously acquired developers Pandemic Studios and BioWare Corp. for $300 million last year. Any deal involving Take-Two is predicted to be worth more than $1 billion.
Needless to say, we will be monitoring these developments very closely and will report back to you once we learn more.
The Post reported last week that Take-Two was in "serious discussions" with several buyout firms and it appears that Elevation is the leaning candidate to acquire the Grand Theft Auto series publisher. According to the Post, Elevation has partnered with Pequot Capital, a hedge fund and venture capital investor that owns a significant amount of Take-Two's shares.
The deal faces some significant hurdles as Take-Two is currently embroiled in:
- multiple shareholder class action lawsuits over its handling of the "Hot Coffee Affair" and its resulting negative financial impact on the company's earnings and stock price
- a lawsuit filed by the city of Los Angeles for the sale of Grand Theft Auto: San Andreas related to the "Hot Coffee" fiasco
- the fallout over the resignation of the chairman of the company's audit committee due to her "concerns" about the company's accounting and governance issues involving its financial internal controls
- a potential Securities and Exchange Commission (SEC) investigation related to the company's accounting practices
- an Alabama lawsuit that alleges a teenager went on a killing spree due to the influence of the Grand Theft Auto series
- the company is burning through cash at a significant rate
These problems have led many industry analysts to downgrade their opinon of Take-Two's stock and even caused some such as Citigroup's Elizabeth Osur to suggest that the company's "market capitalization is less than the sum value of its various parts" - in other words, Take-Two Interactive is more valuable if broken up into its component assets (its studios) than as a single entity.
This has led many to speculate that the eventual goal of any buyout by a private equity firm such as Elevation would involve eventually spinning-off the company's studios as independent entities.
Elevation Partners had previously acquired developers Pandemic Studios and BioWare Corp. for $300 million last year. Any deal involving Take-Two is predicted to be worth more than $1 billion.
Needless to say, we will be monitoring these developments very closely and will report back to you once we learn more.
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