N'Gai Croal
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Jun 12, 2008 11:12 AM
When we brought attorney Justin Blankenship aboard the good ship Level Up as our legal correspondent, we fully intended to have him write about subjects other than Electronic Arts' attempted takeover of Take-Two. And indeed, he has other columns in the works. But when news broke of a new dust up between Take-Two and the Federal Trade Commission, we knew we had to ask Blankenship to explain it all for you, Dear Reader. As we've said before, Blankenship previously worked in the FTC's Mergers 2 division in Washington, D.C. from 2001-2004, which gives him tremendous insight into the FTC's methodology. In today's column, he explains why EA agreed to hold off on its acquisition of Take-Two for at least 45 days, as well as the FTC's affidavit alleging that Take-Two is stonewalling its second request for information. The law is ordinarily a dry beast, but we assure you that if you take the time to read through to the end, you'll find some juicy morsels of analysis waiting for you. Enjoy.
Two pieces of news surfaced during the past week regarding the Federal Trade Commission's review of Electronic Arts' ongoing efforts to acquire Take Two. Here's a brief update on what exactly is going on, and where the investigation appears to be headed.
On June 4, EA announced that it would be extending its $25.74 per share offer for Take-Two stock an additional two weeks. EA also announced that it had agreed with the FTC to hold off on its acquisition until the FTC had concluded its investigation, or the expiration of 45 days, whichever occurs first. It's worth noting that although EA may have made a deal with the FTC that could potentially allow the deal to move forward in 45 days, EA would be moving forward at its own peril if the FTC hasn't concluded its investigation.
If the FTC decided that a deal was worth stopping, it would typically seek a preliminary injunction in federal court to prevent the parties from consummating the deal. If the FTC was successful and the parties still wanted to move forward, they would then have the opportunity to make their case during an administrative trial. However, in the rare event that merging parties consummate a deal while the FTC review process is still pending, the FTC can still use the administrative trial to "unwind" the deal. It's a much steeper hill for the FTC to climb, and the difficulty of unwinding assets makes it a less than ideal remedy for consumers, but it has been done (see here).
The point here is that I wouldn't place too much stock in the 45-day agreement.
To read the rest of Blankenship's analysis, click on the link below.
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