GT Interactive's [GTIS] sagging stock price is not likely to deter its planned acquisition of MicroProse [MPRS], analysts and MicroProse officials
agree. GT plans to acquire MicroProse in a stock deal expected to close at the end of the year. But both sides have the option to the cancel the
transaction if the average of GT's closing price in the 30 days before the deal's completion falls below $8.25.
A walk-away clause is part of a contract between the two parties, a MicroProse official confirms, but adds that MicroProse plans to go ahead with
the acquisition. GT officials did not comment.
Although GT's stock was trading higher than $10 a month ago, it's now trading at less than $8. It hasn't fallen below $8.25 on a 30-day average,
however. The MicroProse acquisition was valued at $250m when it was announced last month(MMW, Oct. 7). At that time, GT's stock was
above $10.
Yesterday, GT's shares fell 1/16 to 7-3/4, while MicroProse's dropped 3/16 to 4-13/16.
GT's stock was hammered by the historic spiral that sent Wall Street to a 554- point plunge last month, with GT shares losing nearly 17%. Another
reason is that shareholders don't view the MicroProse deal positively, observers say. "Markets almost never like big acquisitions," since they dilute
stock and make company management more difficult, Frost says.
The walk-away clause is merely an option, not a "statement of intent," and a drop in GT's stock would have to be "far more dramatic" for either
side to back out, Furman Selz analyst Stewart Halpern contends.
Walk-away clauses are standard and this was not a nervous shotgun wedding, says Dean Frost of Frost & Berman, which tracks mergers and
acquisitions for MMWIRE. MicroProse talked to a number of potential suitors when it went up for sale, Frost says. MicroProse chose GT because
it believed GT's deal was "substantially better" than others, he says. A better offer is not likely to emerge at this point, he asserts. (MicroProse,
Stephen Race, CEO, 510/522-3584; Furman Selz, Stewart Halpern, 212/309-8200; Frost & Berman, Dean Frost, 415/274-2400)
mmwire.com
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