Take-Two Proxy Battle on Tap

The video-game maker's annual shareholder meeting will likely result in a changing of the guard.
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With its annual shareholder meeting just about a week away, video-game publisher

Take-Two

(TTWO) - Get Report

is likely to see a regime change.

Take-Two is

facing a revolt by a large bloc of shareholders comprising OppenheimerFunds,

D.E. Shaw Valence Portfolios

,

S.A.C. Capital Management

and

Tudor Investment

. Together the group is gunning for a change in the CEO and the board of directors.

And the shareholders are likely to succeed in their efforts, say corporate governance experts.

"This is very different from the usual situation where a shareholder has about a 10% stake or less and has to solicit for additional votes," says Beth Young, senior research associate with The Corporate Library. "In this case they are almost already there."

With control of nearly 46% of outstanding shares, there is unlikely to be a long, drawn-out or expensive proxy fight, and current management at New York-based Take-Two is most likely to be swept out -- unless it strikes a deal with the dissenting shareholders, say experts.

"It is extraordinary that a group with that much stock is asking for change, and it is a pretty big deal," says Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. "All they need to do is pick up a few additional votes to get what they want."

Elson suggests that the shareholder filing may also be a ploy to put pressure on the board to replace management. "If at some time the management does not respond, they will look to change it," he says. "And if shareholders are that angry, there clearly will be changes."

The group has said clearly in its

Securities and Exchange Commission

filing on March 7 that it does not intend to solicit any stockholder to vote or withhold a vote in the current battle. The group also has said in the filing that it will not accept any proxies from shareholders and does not intend to make any public statements or respond to shareholder inquiries about this.

"If they already have the votes they need, they probably don't care about giving shareholders an opportunity to vote for their candidates," says Young.

Take-Two's annual shareholder meeting has been scheduled for March 23.

The company also faces dissident shareholder and outspoken critic Jack Thompson, who initiated the protest against the racy content hidden in its 2004 video game

Grand Theft Auto: San Andreas

. Thompson had sent a letter to Take-Two in January asking for the company to speak at the shareholder meeting ostensibly against the current management.

"With Take-Two, you have a management team less than forthright with investors and the board," says Thompson, who has now written a letter to

ZelnickMedia, the financial and management consultant to the shareholder coalition.

Meanwhile, other institutional shareholders are amassing positions in the company. The Italian bank Unicredito Italiano said in a filing that it has raised its stake in the company to 10.3%.

Shares of Take-Two closed the regular session Wednesday up 15 cents, or 0.73%, to $20.60. The stock

has been up nearly 16.5% since the news of the shareholder filing.

Take-Two's management is tight-lipped about the impending proxy battle. The company declined numerous requests for a comment and hasn't publicly disclosed its plans or whether it is negotiating with the shareholder group.

It's a difficult fight for the company's current management to win, though proxy battles are typically stacked in management's favor. But because of the large stake of the activist shareholders, Take-Two might be at a disadvantage.

"Unless this company has near-perfect turnout and every person voted for management, it's difficult to see how Take-Two's existing management can get its way," says Young. Many retail shareholders may not vote, and broker nonvotes will not be counted as votes cast either for or against the proposals.