Take-Two Investors Plan Board Coup

Investors who own nearly half of video game publisher Take-Two Interactive have announced plans to seize control of its board and oust CEO Paul Eibeler.

Video game publisher Take-Two Interactive has been under considerable fire in the last couple years. First, a scandal over hidden, sexually explicit content in the hit game Grand Theft Auto: San Andreas cost the company millions of dollars as they were forced to recall and retool the game—plus endure months of criticism and investigation by industry and Federal regulators. And last month, former Take-Two leader Ryan Brant became the first U.S. CEO to be convicted of illegally backdating stock option grants to increase their value.

Now, according to a filing with the Securities and Exchange Commission, a group of investors who control 46 percent of Take-Two Interactive, frustrated with the controversy the company has created—and by the fact it’s consistently failed to make its financial targets—have announced plans to try to take over the company board and oust chief executive Paul Eibeler.

The group, which includes Oppenheimer Funds, S.A.C. Capital Management, Tudor Investment Corp., D.E. Shaw Valence Portfolios, and ZelnickMedia Corp., have announced they will see to have former BMG Entertainment chief Strauss Zelnick appointed as non-executive chairman of Take-Two’s board, and also seek the power to replace Take-Two’s current CEO and review the employment status of CFO Karl Winters.

The shareholders group said it would nominate a slate of six directors to Take-Two’s board, including Strauss Zelnick, and vote to reduce the size of the board to six members from the current nine, meaning the group’s nominees would constitute the entire Take-Two board of directors.

Take-Two’s annual stockholder meeting is scheduled to take place March 23.

Analysts and investors generally seem to be greeting the prospect of a management shift at Take-Two as a positive step, as regulatory officials and investors have been made wary by the company’s lapses, inconsistent execution, and all-too-public mis-steps. Shares of Take-Two Interactive rose on the news of the proposed board takeover, but some industry watchers warn that even if the coup is successful, no one should expect an overnight turnaround.