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Technology Stocks : GTIS - Will it be a Phoenix or not ? -- Ignore unavailable to you. Want to Upgrade?

To: RJC2006 who wrote (1284)	12/6/1997 10:07:00 AM
From: Bill Gizzo	Read Replies (1) \| Respond to of 2319

Some rehash of the news, and additional information not in the press releases. From PC Gamer site GT and MicroProse Cancel Merger GT Interactive will not acquire MicroProse, it was announced today. The boards of directors at both companies unanimously agreed to terminate the agreement, but were vague about the reasons. They did say however that since the agreement to cancel was mutual, there would be no breakup fees involved. "We're bound by confidentiality agreements," Allyne Mills, GT's vice president of corporate communications, tells PC Gamer. "Since we made the announcement, market conditions changed significantly, and based on that and other issues, both companies decided it wasn't the right time." For its part, MicroProse said that the ended merger plan will contribute to a net loss of between $7 and $10 million for the third fiscal quarter -- the all-important holiday quarter ending December 28th. "In essence, the two months spent on determining how to integrate the two companies has resulted in at least a quarter's worth of slippage in our business plan and product release schedule," says Stephen Race, CEO of MicroProse. The company is now revising its business plan, re-opening domestic distribution channels, and recruiting new salespeople. One possible reason that the deal may have fell apart is that GT took a closer look at MicroProse's books, and didn't like what they saw. "Prior to the announcing, I'm assuming GTI anticipated huge cost savings," says Ian Berman of Frost & Berman, an investment bank that closely follows the entertainment software industry. "After closer examination, either those economies of scale weren't going to be realized, or the amount of time and money to realize those savings turned out to have been too great." Furthermore, Wall Street was never behind the deal, Berman says, noting that the stocks of both companies dropped after the announcement. "I'm assuming GTI had to go out and raise additional capital or raise debts," says Berman, "because the amount of capital they had was low for a company their size, vis-a-vis their competitors." Berman says it's also possible that GT couldn't raise the capital necessary to complete the acquisition, or couldn't raise it on terms favorable to the company. But GT's Mills says that that latter scenario was not the case. The two companies will still work together in some areas, as GT will still handle some MicroProse products, including its Macintosh titles and its backlog of old PC games. Mills says GT is still looking to grow through acquisitions of other developers, with an eye to well-run studios that complement its software lineup. Cheers Bill