Senator? You can have my answer now, if you like. My final offer is this: nothing. Not even the fee for the gaming license, which I would appreciate if you would put up personally.
--Michael Corleone in "The Godfather: Part II"

For a deal that's yet to be consummated, there's been a whole lot of activity surrounding Electronic Arts' proposed acquisition of Take-Two. First came the news that the Federal Trade Commission had requested further information and additional time to complete its review of the deal--the "hard look" at the deal that Level Up's own guest poster and former FTC lawyer Justin Blankenship had predicted. Next, at its shareholders meeting last night, Take-Two's board continued to urge its stock owners to reject EA's tender offer.

Finally, this morning, EA announced that it had extended the deadline for its tender offer to May 16th--while reducing the value of its offer from $26 per share to $25.74 to reflect the additional shares of restricted stock that have been granted to Take-Two management. To make sense of all of the head-spinning feints and counter-moves, we shot an email over to the omnipresent Wedbush Morgan analyst Michael Pachter. Here's what he had to say:

What should we make of Electronic Arts' decision to extend its tender offer to Take-Two shareholders to May 16th, 2008?

They extended because they fully intend to wage a proxy battle over the next month. That will essentially involve nominating a new board and soliciting the vote of 50.01 percent ofall shareholders (including those who could not vote yesterday because they bought after February 19). If they win the proxy battle, they will take control of Take-Two.

Is there anything significant about that date?

The date is four weeks away, apparently their assessment of the time required to win a proxy fight.

Former Federal Trade Commission lawyer Justin Blankenship wrote on Level Up that he expected his former employer to "give this deal a hard look," especially in light of your comments that:

"Currently [EA and Take-Two] compete in pro basketball, college basketball and hockey. So by taking out all of that, EA has a monopoly in sports. If these guys have a monopoly, they're not going to cut pricing on sports games as quickly. We've been seeing sports games come down [in price] before Christmas the last couple of years. That'll never happen again."

Do you agree with Blankenship's analysis? Also, what do you make of the recent announcement that the FTC has requested further information and additional time to complete its review of EA's proposed acquisition of Take-Two, as Blankenship predicted, and what impact will this have on the deal?

He's right that the FTC is looking at this hard, and right that sports is the likely focus. In the final analysis, sports is a large category (probably $3-4 billion), and EA-TTWO have around $1.5 billion of the market, combined. I think that level of concentration is less problematic to the FTC than is the elimination of competition in NBA, NHL and NCAA basketball. However, those markets total only around $400 million combined (wholesale). Price competition occurs only to the tune of around $40 million or so consumer benefit. I derive that number by assuming 30 percent of all units are discounted by 33 percent because of head-to-head competition.

EA will argue that this is de minimis, or, in the alternative, will show that it discounts 30 percent of other games by 33 percent, demonstrating that head-to-head competition will provide NO consumer benefit. Most importantly, NO retailer will oppose the merger, indicating that EA doesn't gain pricing power from the combination.

Do you still stand by your prediction that this acquisition will go through?

This deal is happening. TTWO shares aren't trading here because of TTWO's financial performance, which is unchanged since before the EA offer. It's up because arbs [arbitrageurs] plan to sell to EA. Watch them squeeze another dollar out of EA, but they will vote for EA's board slate, and will tender.

Prediction: the final price will have a ".74" at the end, to demonstrate EA's unwillingness to pay for the ZelnickMedia compensation package.