Take-Two Interactive Software told shareholders to reject a $2 billion hostile bid from rival video game publisher Electronic Arts as too low, but said it had begun efforts to explore a sale or other options.
Take-Two said it was still open to a combination with EA or another company, but not before the April 29 release of its "Grand Theft Auto 4" title, widely expected to be the best-selling video game this year.
The company's board has begun to consider strategic alternatives and assemble materials necessary for any interested parties to conduct due diligence. Take-Two said it has seen indications of interest from other companies since EA made its $26-per-share offer, but has not held any substantive talks.
"We're starting now to be in a position to have discussions on April 30," Chairman Strauss Zelnick told Reuters in an interview. "We think that's the best way to address not only EA's interest, not only other third-party interest, but that we've deeply considered the option of staying independent."
Zelnick did not rule out reaching an agreement before the "Grand Theft Auto 4" release if there was a major change to EA's position, which he said undervalued the game. He said Take-Two was committed to exploring its options even if EA backed off.
Take-Two also adopted a 180-day shareholders' rights plan, or poison pill, to guard against EA's hostile bid and delayed its annual meeting in New York to April 17 from April 10.
EA, the world's largest video game publisher, took its all-cash bid directly to stockholders earlier this month as it faces stepped-up competition from rival Activision, which is merging with the video games unit of French conglomerate Vivendi.
Many analysts expect a deal between EA and Take-Two will ultimately go through, with an offer of $27 or $28 a share.
"This thing is very much in play and we're seeing public bargaining," said Todd Mitchell of Kaufman Bros.
EA's ability to raise its offer is limited by its need to ensure a deal boosts fiscal 2010 earnings, Mitchell said.
"They could do a bid in the $30 to $32 range that is still accretive. I think that is the absolute top," he said. "If the deal comes apart, Take-Two will go back to the low 20s."
Take-Two shares slipped 5 cents to $25.77 and EA shares fell 2.2 percent to $49.05 in morning trading on the Nasdaq.