Following Take-Two's announcement of its fourth quarter financial results, Janco Partners analyst Mike Hickey has said he believes that the company's Rockstar portfolio in particular makes Take-Two a very likely candidate for an acquisition in the foreseeable future.
Hickey credits its broad range of owned and internally-developed IP franchises including GTA, BioShock, Midnight Club, Civilization, Bully, Red Dead Revolver, Manhunt, Carnival Games
and Max Payne
, as well as the "washing of their checkered corporate profile" as opening the door to acquisition potential.
Hickey cited recent mergers like Activision and Vivendi, and BioWare-Pandemic's acquisition by Electronic Arts as "clear examples of owned IP value recognition," and, in light of that, said, "We remain convinced the company will eventually be acquired at a meaningful premium to their current share price."
He continued, "Despite the company’s often clumsy sequential operating performance, the strength of their game portfolio could provide an acquirer a significant growth engine with several un-priced ancillary opportunities like a GTA
massive multiplayer (MMO)."
Hickey noted that EA's purchase price of $855 million BioWare-Pandemic was based on the expectation that the developers would bring in more than $300 million in annual sales, and release an MMO in 2010.
With that in mind, he concluded, "We believe [Take-Two's] Rockstar portfolio of games could generate over $400 million in average sales into the foreseeable future with an embedded option for their own MMO release, suggesting their Rockstar portfolio is worth well over $1 billion, in our view."