Take-Two Interactive Software's (NDAQ: TTWO) board rejected Electronic Art's (NDAQ: ERTS) most recent buyout offer, saying that it was not in the best interest of shareholders. Instead, the company also confirmed that it would explore strategic alternatives to maximize shareholder value in other ways that could deliver a higher value than the current EA offer. So, what is the best move for shareholders at this point?

Electronic Arts, the world's largest video-game publisher, offered to purchase Take-Two for $2 billion in a hostile bid after management refused to negotiate before the released of its "Grand Theft Auto IV" on April 29th. EA wants to purchase the company now in order to obtain upside from the holiday sales of the game, but Take-Two management sees the buyout is opportunistically timed to capture the value of the upcoming game at the expense of shareholders.

Take-Two's board also insists that it has received indications of interest from third parties interested in purchasing the company since EA's bid, but that no substantive discussions have yet taken place. The company is intent on waiting until after the game is released to being discussions, but it did begin to assemble the materials necessary for interested parties to conduct due diligence. Any auction process would likely unlock additional value for shareholders above and beyond $26 per share.

Finally, Electronic Art's tender offer itself may no longer be viable. Take-Two adopted a Stockholders Rights Agreement (ie. poison pill) that would dilute the stock if EA acquired more than 20% of it. This would make such a hostile acquisition extremely expensive and unlikely to occur. Now, EA would be forced to launch a proxy contest to replace directors and remove the poison pill if it wanted to continue its pursuit.

In the end, Take-Two has rejected EA's offer because it has many other offers on the table that it would like to explore after the April 29th launch of its latest installment in the Grand Theft Auto series. It will be interesting to see EA's next move after the board installed a poison pill that put a fork in their plans. Regardless, this is all good news for shareholders that may now see more than $26 per share.

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