Sony Zaps Take-Two M&A Rumor; BofA Says Company Seems Pricey

Share prices for “Grand Theft Auto” and “Red Dead Redemption” publisher Take-Two Interactive Software, Inc. TTWO surged this week on an unsubstantiated rumor that Sony Corp. SNE might be in the market to buy the game maker, but Sony reportedly is knocking down the idea.

Bloomberg News’ Tokyo-based tech reporter Yuji Nakamura said on Twitter that Sony confirmed there is no truth to the rumor.

Take-Two was up about 7 percent on Wednesday, but gave much of that gain back Thursday after several industry observers knocked down the rumor as just that — and not that plausible. The rumor was mentioned in a report by analysts at Wedbush, but was couched in the note as unsubstantiated. 

BofA: ‘Low Likelihood’

Bank of America Merrill Lynch analyst Justin Post said that while Take-Two’s signature game franchises “GTA,” “Red Dead Redemption” and “NBA 2K” would make a “cornerstone” for any game streaming platform, specific moves to seal a possible $15-billion deal seem to have a “low likelihood.”

Sony would need a long-term employment deal with Take-Two’s publishing label Rockstar Games and would also need an agreement with the NBA to keep the basketball game rights, the analyst said in a Thursday note. It also might need a deal with Microsoft Corporation MSFT for cross-publishing, he said. 

Mikio Hirawaka, another BofA analyst who covers Sony, said in a ntoe that Take-Two seems priced too high for Sony.

“In October 2018, Sony’s CFO indicated the company was watching out for M&A opportunities in the game industry, but that share-price valuations were very high,” the analyst said.

“Since October, the share prices of Take-Two and other game software companies have come down, but not enough to change Sony’s valuation perceptions, in our view. We are not confident about the credibility of this acquisition.”

While BofA sees an acquisition as unlikely, Post said he continues to see “strong franchise value” for Take-Two. The research firm has a Buy rating on the stock with a $130 price target. 

Price Action

Take-Two shares were down 3.18 percent at $92.98 at the time of publication Thursday. 

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Take-Two Shares Bounce Back, Analysts Lower Price Targets

Photo courtesy of Take-Two.