Take-Two's board of directors prepares for an overthrow
- March 08, 2007 17:56 PM PST
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Investors have said enough is enough - analysts predict that a takeover of Take-Two's board is "likely".
By Eugene Huang
According to a Reuters report, the current board of Take-Two Interactive is in serious danger of an overhaul. In view of the company's recent string of damaging litigations, a group of investors who own 46% of the company's shares have recently stated that they are looking to wrest control of the board of directors and oust its current chief executive.
The investor group, comprising of a number of investment firms, is hoping to appoint former BMG Entertainment CEO Strauss Zelnick to the post of non-executive chairman. As chairman, he will attempt to replace current Chief Executive Paul Eibeler and place current CFO Karl Winters under employment review. The group also plans to nominate six new directors to Take-Two's board, and furthermore, it plans to reduce the number of board members from nine to six, which would, in turn, leave their members in sole possession.
While the currently on-going class-action settlement regarding the Hot Coffee incident is certainly a factor in this decision, analysts claim that the stock option scandal associated with former Take-Two CEO Ryan Brant caused even more of a nightmare for investors.
"[The board] completely abdicated any responsibility for the oversight of the options-granting policy," says Michael Pachter of Wedbush Morgan Securities. "A more responsible board would have committed hari-kari[sic]."
JP Morgan analyst Dean Gianoukos also believes that a takeover is inevitable, writing in a research note, "Given Take-Two's history of inconsistent performance and execution, we would view the proposed management change (which we believe is likely) as a positive for the company, assuming key development personnel are retained."
Although most analysts agree that this upheaval is almost assured, some have questioned its effectiveness. Arvind Bhatia, director of research at Sterne, Agee, & Leach, told Reuters that the company needs to do more than just be a "one-product company."
"Outside management can play a role, but I just think it will take time," he said. "The company's problems can't be corrected overnight."
