Take-Two shareholders in charge

Take-Two Interactive Software Inc.'s weak anti-takeover defense puts the company at the mercy of shareholders seeking control of the video game publisher.

Locked in a proxy fight with a group of investors led by asset management firm OppenheimerFunds Inc. of New York, Take-Two on Monday postponed its annual meeting, which had been scheduled for Friday, until March 29. Under the New York company's corporate governance charter, however, shareholders may act to replace Take-Two's board members so long as a majority backs such a proposal, obviating the need for a formal vote.

The shareholder-friendly provision is a 'gaping hole' in Take-Two's takeover defense, said Christopher Young, a director with proxy advisory firm Institutional Shareholder Services Inc.
'The company in its governance document allows for action in lieu of a meeting,' he said. 'Once the required percentage of shareholders sign, the action is taken immediately.'

That poses a serious danger to Take-Two CEO Paul Eibeler and other senior managers, because investors representing more than 46% of the company's shares are backing the dissident shareholders. Analysts expect other investors also to pledge their support, which would give the group the necessary shares to oust Take-Two's leadership.