It cannot be said that the news is not good for TTWO. According to The New York Times "The company is expected to report it sold six million copies of the graphically violent game, 3.6 million of them on the first day."

Electronics Arts has offered $25.74 per share for Take-Two. The company’s stock trades about a $1 below that. The good news may push it up some.

Take-Two traded at just above $17 before ERTS made its offer. The most curious thing about the bidding dance is that no other company has come to the table with an offer. Take-Two does not fit well with any other company. Electronics Arts can make TTWO worth $25 or so. That does not appear to be the case for anyone else.

The M&A mavens learned something from Steve Ballmer this weak. Walking away from a bid when the prey has no other real options can be a huge advantage. He did it with Yahoo! and dropped the portal’s price by 15% in one day. All that is holding Yahoo!’s shares up is the hope that Microsoft might come back.

Electronic Arts has seen the "Grand Theft Auto IV" numbers. TTWO will take them as an excuse to ask for a higher price. If EA management has any insight, they will walk away this week and watch the Take-Two stock drop to $20. Then they can start negotiations again on a more reasonable basis.

Douglas A. McIntyre