A shareholder revolt at Take Two Interactive:
Disgruntled Shareholders Vote in New Board at Take Two Interactive
By JEREMY W. PETERS
Published: March 30, 2007
Take Two Interactive software, the video game maker mired in boardroom factions, grand jury subpoenas and bad fortunes, faced an insurrection from shareholders yesterday that claimed the chief executive and three directors who were at the center of a stock options backdating scandal.
Dissident shareholders voted in five of six new directors at yesterday’s annual shareholders meeting.
The new board then promptly meet and named as chairman, Strauss Zelnick, a long-time media executive who has run BMG Entertainment, the global music label, and 20th Century Fox, the movie studio.
The board also voted to remove Take Two’s chief executive, Paul Eibeler, and announced a new interim chief, Ben Feder, who is a partner in Mr. Zelnick’s investment firm, ZelnickMedia. Mr. Feder had previously been a senior executive at the News Corporation.
For Take-Two Interactive, publisher of the wildly popular Grand Theft Auto game franchise, the boardroom upheaval is only the beginning of its problems. Despite the popular Grand Theft series, it is unprofitable, losing $184.9 million in 2006.
The company also recently restated eight years of financial results in connection with the backdating of stock option that is being investigated by the Manhattan district attorney and the Securities and Exchange Commission. The restatements totaled $42 million, the company said.
Take Two’s former chief executive, Ryan A. Brant, pleaded guilty last month to falsifying records and agreed to pay $7.3 million in penalties to the State of New York and the Securities and Exchange Commission.
Early this month, unhappy shareholders led by Oppenheimer Funds, Take Two’s largest investor, surprised the video gaming industry when it proposed its own slate of directors.
In response, Take Two’s chief, Mr. Eibeler, began looking to sell the company but did not find a buyer.
Mr. Eibeler said yesterday after the shareholder vote that Take Two had run out of time.
“We explored our options,” he said, “and we didn’t see them as happening in this timeframe.”
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