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Take-Two Offer for Codemasters Is Topped by Electronic Arts

Take-Two Interactive’s $956 million bid for Codemasters is topped by rival game maker Electronic Arts, which agrees to pay $1.2 billion for the London-based company.

Take-Two Interactive’s  (TTWO) - Get Take-Two Interactive Software, Inc. Report nearly $1 billion bid for Codemasters Group has been topped by rival game maker Electronic Arts  (EA) - Get Electronic Arts Inc. Report, which agreed to pay $1.2 billion for the London-based maker of racing video games.

Electronic Arts on Monday said it had reached an agreement to acquire Codemasters, in which Codemasters shareholders will receive 604 pence ($7.98) in cash for each ordinary share, higher than Take-Two's offer in November that valued Codemasters at about 528 pence a share.

“To strengthen the position that Codemasters has built within the racing category, there is an increasing necessity for additional investment in both resources and skills across its portfolio,” Codemasters said in a statement Monday.

The rival offer could spark a bidding war for Codemasters, which was kicked off by Take-Two in November following the popular Formula 1 racing franchise maker’s initial bid for Codemasters, which analysts said didn’t value Codemasters as high as its other publicly traded peers.

“Take-Two is considering its position in relation to Codemasters and a further announcement will be made when appropriate,” Take-Two said in a statement.

Take-Two’s bid already faced investor opposition. The cash-and-stock offer first put forward in early November has fluctuated over the past six weeks, translating as of Friday’s close into more than a 1.1% discount to Codemasters’s share price.

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At the same time, analysts have viewed Take-Two as a strategically strong fit for Codemasters, which lacks the franchises and also technology sharing capabilities that have made Take-Two games like "Grand Theft Auto" and "NBA 2K" successful. 

Codemasters is the developer behind racing games like "Project Cars," "DiRT," annual F1 games and "GRID."

Electronic Arts already has established racing franchises like "Need for Speed," though also has more cash in its coffers. In 2019, Electronic Arts earned $5.5 billion compared to $3.08 billion for Take-Two. 

“In some respects, EA’s move feels defensive,” Mirabaud analyst Neil Campling told Bloomberg, “because they are already under attack from Take Two and many of their franchises are becoming second rate relative to leaders.”

The videogame boom sparked by the pandemic and stay-at-home orders globally is expected to send industry revenue up 20% this year to $174.9 billion, outstripping earlier forecasts and dwarfing the market’s growth in 2019, according to research firm Newzoo.

Shares of Take-Two were up 2.69% at $195.33 in trading on Monday, while shares of Electronic Arts were up 1.33% at $137.61.

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