Shareholders have sued Take-Two Interactive Software in Delaware Chancery Court for the company’s rejection of a takeover offer in which Electronic Arts Inc. offered a 64-percent premium, according to press reports.
The suit claims that Take-Two, maker of the hit video game Grand Theft Auto, rebuffed its game-making rival’s $26-a-share offer, for a total of $2 billion, so that Take-Two management and other insiders could enrich themselves at the expense of other shareholders, according to the online version of the Wall Street Journal..
Shortly after the Feb. 19 Electronic Arts offer, Take-Two altered its compensation agreement so that it effectively would award certain officers and employees with big payouts under certain circumstances if there is a change-of-control. Executive chairman Strauss Zelnick; CEO Ben Feder; and executive vice president Karl Slatoff were not included since they have a separate compensation agreement.
“These types of plans are fairly common for publicly traded companies,” the company said in a regulatory filing when it announced the compensation changes last week. “In fact, both Electronic Arts and [Take-Two] have change in control severance plans,” it added.
According to the Journal, the lawsuit was filed last Friday in Chancery Court and named as defendants Zelnick and Feder, as well as ZelnickMedia Corp., which manages Take-Two.
The lawsuit claims that the increase in ZelnickMedia’s compensation in the event of a “change in control” will hurt the company’s ability to get a higher price from EA, according to the report.
“We believe that the claims lack merit, and intend to defend vigorously against them,” the company reportedly said in a statement.
Take-Two was been embroiled in other problems before the Electronic Arts hostile bid and the shareholder challenge to Take-Two’s rejection. It was involved the stock-option backdating scandal. And a former PricewaterhouseCoopers audit partner for the company recently settled civil charges related to accounting fraud at the publisher of the blockbuster “Grand Theft Auto” video-game series.