EA's Hostile Bid May Click With Shareholders

Mahoney says EA is keen to complete the acquisition by spring so that the company can gear up to publish Take-Two's games in time for the holiday season.

For Take-Two, the merger with EA could help mitigate some of the company's problems.

Despite Take-Two's upbeat outlook for the year, the company is struggling.

Take-Two raised its forecast for the year on hopes for a bigger-than-expected blockbuster in its upcoming game, Grand Theft Auto IV, scheduled for released on April 29.

At the same time, though, the company said it will delay the launch of its game, Midnight Club: Los Angeles, a racing game, and Borderlands, a shooter game.

"The fourth quarter 2008 launch of Midnight Club will mark three-and-a-half years between versions of the game, highlighting Take-Two's failure to sequelize its key franchises on a regular basis," Pachter says in a recent research note.

For instance, Max Payne, a game from Take-Two was last released at the end of 2003, Red Dead Revolver in May 2004 and Mafia in January 2004, Pachter notes.

A sequel to the Mafia game has been scheduled for release in 2009.

"Take-Two is the pretty much the same company it was over the past three years, but has the good fortune to have Grand Theft Auto IV coming out next month," Pachter says in his note. "The game will mask recurring problems from the rest of the company's operations."

And no one understands this point better than EA, which is insisting on the completion of the Take-Two purchase before the release of Grand Theft Auto IV.

EA CEO John Riccitiello has characterized Take-Two as a "depreciating asset" in the past. While that may be an exaggeration, Take-Two's road to profitability remains rough, with questions about its future after the release of Grand Theft Auto IV.

That's why for Take-Two shareholders, EA's offer -- though hostile -- may be their best bet.

Know What You Own: Electronic Arts operates in the multimedia and graphics software industry, and some of the other stocks in its field include Activision ATVI and Sony SNE. These stocks were recently trading at ($27.19, +1.38%) and ($43.22, -0.32%) respectively. For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.