Postings: April / May 2008

Grand Theft at Take-Two?

In February, the board of videogame publisher Take-Two Interactive Software rebuffed two unsolicited acquisition offers by Electronic Arts (EA), arguing that they undervalued the company. The drama made headlines, but it was the move by Take-Two’s board to approve a change to an agreement with ZelnickMedia—an investment firm that runs the company—that really raised the eyebrows of corporate-governance watchers.

Take-Two deemed EA’s offers, first at $25 and then $26 a share, “highly opportunistic,” and as an attempt to take advantage of the upcoming release of the fourth installment of Take Two’s popular Grand Theft Auto videogame. “In addition to undervaluing key elements of our business, EA’s proposal fails to recognize the value we are building through our ongoing turnaround efforts,” said Strauss Zelnick, chairman of Take-Two’s board and founder of ZelnickMedia.

Between the two offers, Take-Two’s board approved an amendment that, in the event of a merger or takeover, more than triples the annual fee it pays ZelnickMedia for providing financial and managerial consulting services. The board also raised the maximum annual bonus ZelnickMedia is eligible to receive and would give the firm 1.5-million restricted shares, valued at about $40 million, should the award win approval from shareholders at the annual meeting. The timing prompted Take-Two shareholder Patrick Solomon to file a lawsuit alleging that the company’s failure to “reasonably respond” to EA’s offers “minimized shareholder value.”

"It’s problematic, ethically. It has the appearance of an attempt to take advantage of a potential merger,” says Kirk Hanson, executive director of the Markkula Center of Applied Ethics at Santa Clara University. “On the other hand, it may have been completely innocent.”

Take-Two believes it is in the best interest of shareholders to remain cordial and resume a conversation after the videogame’s release in late April. Such an offer could benefit its management company handsomely. –Matt Perkins

New Appointments: 

Zale Corp. has named Richard C. Breeden and James M. Cotter to its board. Breeden, former chairman of the Securities and Exchange Commission, is the CEO of Breeden Partners. His appointment to the board comes after Breeden Partners acquired a stake in the company. Cotter is a founding partner of Breeden Capital Management and senior managing director of Richard C. Breeden & Co.

The Home Depot named Michaels Stores CEO Brian C. Cornell to its board. He has also served as chief marketing officer of Safeway, and prior to that was president of Pepsi-Cola North America’s food-services division.

Anne Sheehan has joined the board of the California Public Employees’ Retirement System as the designated representative of the State Personnel Board of which she has been a member since 2003. Sheehan has also served as the chief deputy director for policy of the California Department of Finance.

Exxon Mobil named Larry R. Faulkner, president of Houston Endowment and president emeritus of the University of Texas at Austin, to its board. Faulkner is a member of the American Academy of Arts and Sciences and serves as chair of the National Mathematics Advisory Panel by designation of the President and Secretary of Education. He also serves on the boards of Temple-Inland and Guaranty Financial Group.

Overstock.com named James V. Joyce to its board for a term ending in 2010. As CEO of Icent, Joyce has provided organizational consulting services to the company since 2005, and has also worked for Bain Consulting.

Nancy L. Buc, a partner in the law firm of Buc & Beardsley, was named chair of the Food and Drug Law Institute’s board. Previously, she served as general counsel for the Food and Drug Administration, and was an attorney- adviser to the chairman of the Federal Trade Commission. Seven other board members were also appointed, including William B. Schultz, a partner with Zuckerman Spaeder, who was named vice chair, and Linda Suydam, president and CEO of Consumer Healthcare Products Association, who was named treasurer.

Sanmina-SCI named John P. Goldsberry to its board and as chairman of the audit committee. Goldsberry is CFO of Gateway.