Icahn forces board change at Take-Two

Three directors of Take-Two are to step down from their positions following pressure from shareholders including billionaire investor Carl Icahn, who owns over 11 per cent of the publisher.

Ben Feder, Grover Brown and John Levy have announced they will not stand for re-election, although Feder will remain CEO, with Icahn nominating SungHwan Cho, Brett Icahn and James Nelson in their place. An election will take place at the 2010 annual stockholder meeting.

"I want to express my gratitude to Ben, Grover and John not only for their dedicated service to Take-Two stockholders but also for their very gracious decision not to stand for re-election so that we can facilitate a change in Board composition," commented Strauss Zelnick, chairman of the Grand Theft Auto publisher.

"It’s important to note that Mr. Icahn did not request that these directors in particular step down; they were willing to continue in their role but agreed not to stand for re-election in keeping with their commitment to the Company and desire to put the best interests of stockholders first, as they have done throughout their tenure on the Board."

"Advancing our stockholders’ interests is the Board’s guiding principle, and it’s in that spirit that we’ve undertaken a change in board representation," added Zelnick. "We have much to accomplish at Take-Two in the year ahead, and we welcome the new directors who each have experience in the entertainment industry and will help us achieve our objectives."

Carl Icahn increased his stake in the publisher late last year, prompting speculation that he will seek a sale for the company in 2010.

"Take-Two has industry-leading development talent and intellectual property," said Icahn. "I’m a firm believer in the long-term potential of the Company, and from a corporate governance point of view I applaud the current board for its responsiveness."

Icahn has agreed to back Take-Two's five nominees for the board, and if the three proposed by Icahn are elected and his stake in the publisher falls below 5 per cent, those directors will resign.

Speaking to GamesIndustry.biz, Wedbush Morgan analyst Michael Pachter said he saw the board changes as a "healthy" move for the company, which will help it make better decisions.

"It is healthy to have an all-outside board of directors. Zelnick is executive chairman, so technically not an employee, and he makes sense on the board. Replacing the others with three selected by Icahn should provide a level of healthy scepticism about business as usual, and should serve to help the company make better decisions."

He added: "It's impossible to say whether this signals a desire to sell. Icahn would need majority board approval for that, and he did not seek a majority representation. He may plan a sale, but my guess is that he is more interested in finding out how to make the company more profitable first, which should benefit all shareholders."

Pachter said that the company isn't yet ready for a sale as it's still losing money, and EA, which has in the past made an offer on the company, isn't in any position to buy.

"While they're losing money, it's hard to see anyone buying them. EA makes the most sense, as it could consolidate the sports businesses (nobody else can get the same value). However, EA has problems of its own, and is not likely to bid.

"Any other buyer would have to ask if Take-Two would accept a bid below the $26 EA bid 18 months ago, as it's not likely that anyone would bid that much today. Maybe Icahn's representation on the board would result in more reasonable decisions about whether to accept such offers, but it's too early to speculate, as they haven't been elected yet."