NEW YORK: A consortium of investors has disclosed that it intends to oust the board and possibly the top management of Take-Two Interactive Software, a video game publisher that has been plagued by legal, regulatory and accounting issues.
The unusually aggressive maneuver, by the investors, who hold a collective 46 percent of the outstanding shares of Take-Two, comes just a few weeks after Ryan Brant, the company s founder and former chief executive, pleaded guilty to falsifying records in a stock option backdating scheme.
The takeover effort also is unusual in that it entails the cooperation of several hedge funds and mutual funds.
The investors declined to comment, citing legal restrictions, but their filing Wednesday with the U.S. Securities and Exchange Commission said they were seeking to appoint Strauss Zelnick, the former head of BMG Entertainment, as the new chairman of Take-Two.
The filing said Zelnick would ask the board for the authority to replace Take- Two s chief executive, Paul Eibeler, and chief financial officer, Karl Winters.
Take-Two Interactive, publisher of the hit "Grand Theft Auto" franchise, issued a statement saying it was pleased that the investors recognized the value in the company. Ed Nebb, a spokesman for Take-Two, which is based in New York, declined to say whether the statement was meant to indicate that the company would fight the takeover effort.
The board of Take-Two was surprised to learn of the takeover effort and was still considering how to address it, according to a person briefed on the internal discussions. The person asked for anonymity, saying that commenting publicly could compromise his employment with the company.
Wall Street applauded the prospects of a change in direction at Take-Two.
Shares of Take-Two rose 7.6 percent, or $1.34, to finish Wednesday at $18.
95.
The takeover plan of the investors calls for reducing the existing nine- member board to six and installing new people. Take-Two s annual meeting is scheduled for March 23.
Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, said prospects for the plan s success were good, given the large number of shares the investors collectively own.
"All they need to do is pick up a few more votes," he said.
Elson added that ousting the board and possibly management was not a step that most passive investors take lightly and appeared to reflect enormous dissatisfaction.
To get the largest shareholders angry enough to step in is very rare," he said. "You ve got to be very angry to do it.
"
While efforts by hedge fund investors to steer companies in which they have controlling shares is on the increase, it is less common for mutual funds to take such action.
The mutual fund manager OppenheimerFunds, which has a 24.5 percent stake in Take-Two, according to the SEC filing, is among the investors seeking to remake the Take-Two board.
The group also includes the hedge funds D.E. Shaw, which has a 9 percent stake, according to the filing, and partners of SAC Capital, which owns 7.
8 percent.
Emmanuel Ferreira, portfolio manager for OppenheimerFunds, declined to comment. D.
E. Shaw and SAC Capital also declined to comment.
Take-Two remains the subject of a criminal investigation by the New York district attorney s office regarding stock options backdating and possibly broader issues.
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