EA plans tender offer for Take-Two: source

A screenshot from "Grand Theft Auto: San Andreas". Electronic Arts Inc plans to make a $26-a-share tender offer for all outstanding shares of rival video game publisher Take-Two Interactive Software Inc, following its rejection of EA's unsolicited offer at the same price last month, according to a person familiar with the matter. (REUTERS/Rockstar Games/Handout)

SAN FRANCISCO (Reuters) - Electronic Arts Inc <ERTS.O> plans to launch a tender offer for all outstanding shares of rival Take-Two Interactive Software Inc <TTWO.O>, publisher of "Grand Theft Auto" video games, a person familiar with the matter said, indicating EA's $1.9 billion bid is turning hostile.

Take-Two last month rejected EA's unsolicited offer. EA will offer Take-Two shareholders $26 a share, the same price at which it launched its all-cash bid, the person said.

Take-Two Chairman Strauss Zelnick has called the bid "the wrong price and the wrong time," arguing that EA was trying to buy his company on the cheap just before the launch of Grand Theft Auto 4, the latest in a blockbuster franchise which debuts on April 29.

Take-Two this week forecast quarterly earnings higher than Wall Street estimates, saying orders for GTA 4 were better than expected.

"Pre-orders for GTA are very firm and better than we expected internally," Zelnick said on Tuesday.

Earlier this week, the two biggest owners of shares in Take-Two said they drastically cut their stakes in the video game publisher, potentially undermining management's stance that the $1.9 billion buyout offer was too low.

U.S. mutual fund company Oppenheimer Funds, Take-Two's biggest shareholder, halved its holdings to 8.8 million shares, or 11.5 percent, down from the 23 percent stake it held previously, according to U.S. regulatory filings.

FMR LLC, the parent company for the Fidelity mutual funds which was the second-largest owner of Take-Two shares, also reported that it had slashed its stake to 2.75 percent from 14.7 percent.

But Zelnick said earlier in the week that the large sales had not caused executives to reconsider their rejection of EA's offer.

"It certainly doesn't put any pressure on us. Who owns your shares isn't really the issue, after all we're here for all the shareholders," Zelnick said.

Shares of Take-Two closed up 1 percent at $24.91 on Wednesday but have fallen from a high of $27.61 set on February 28, shortly after EA announced its offer.

EA's tender offer will expire on midnight of April 11, but could be extended, this person said. Take-Two's annual meeting is scheduled for April 10.

(Additional reporting by Peter Henderson; Editing by Erica Billingham)