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."
