Take-Two Interactive (NDAQ: TTWO) may have to do a double-take after Electronic Arts (NDAQ: ERTS) launched a hostile $2 billion tender offer directly to its shareholders. The $26 per share offer is four percent higher than TTWO’s closing price yesterday and a 64 percent premium to the pre-takeover price. Electronic Arts says the bid will expire at midnight on April 11th - the day after Take-Two’s annual shareholders’ meeting. So, is this a deal worth taking for TTWO shareholders?

Take-Two’s real value lies in its Grand Theft Auto video game series that has sold more than 65 million copies, making it one of the most valuable franchises in videogame history. The company is expected to release the next version of the blockbuster series on April 30th and has insisted that it will talk to EA afterwards. Take-Two believes that EA’s buyout attempt as well as reported interest by others is simply an attempt to buy a franchise on the cheap.

Unsolicited takeover offers like these have become increasingly common as larger companies seek to add valuable brands to their portfolio rather than retain key executive. However, these offers can be difficult as investors tend to hold out for a better offer until the last second while boards negotiate a deal behind the scenes if majority shareholder support is in place. This situation is no different and illustrates the clear value of Take-Two’s franchise game.

Interestingly, Take-Two’s existing board consists of hostile shareholders from a different era. The company’s previous management and board was ousted a year ago by dissident shareholders who installed directors from ZelnickMedia to control the company. It will be interesting to see how shareholders respond to this offer, and more importantly, how the board responds to the offer given their past skepticism in the offer.

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Time Warner’s (NYSE: TWX) AOL may be finally realizing that dial-up internet doesn’t have the brightest future. The popular internet service provider announced today that it purchased social media site Bebo.com for $850 million in an effort to boost its content network. The deal comes after a broad attempt to transform itself from an internet service provider to an advertising-driven content network. So, will this acquisition end up paying off?

Bebo is a social network that caters to the younger demographic with a focus on entertainment - a combination particularly attractive to advertisers. It is also the third largest social networking site, behind MySpace and Facebook by a large margin. However, Bebo is one of the largest social networks in Britain and is ranked number one in Ireland and New Zealand. This international exposure could be just the edge needed to create value.

Social media acquisitions are hard to value for investors. News Corporation’s (NYSE: NWS) purchase of MySpace was a record at the time and ended up paying off- the $580 million purchase is now worth an estimated $15 billion. However, Microsoft Corporation’s (NDAQ: MSFT) $240 million 1.6% stake in Facebook is still seen as overpaying. It turns out the Bebo also shopped itself to other competitors like CBS Corporation (NYSE: CBS), but many thought it was too expensive.

The acquisition fits well into AOL’s new content provider business model. The company has already launched 17 international websites over the last year and has plans to expand to 30 countries by the end of 2008. Bebo is not only the third largest social network in the U.S., but also has international exposure that could synergize well with AOL’s other holdings. Meanwhile, a string of ad-sales companies should enable the company to drive advertising dollars.

In the end, this is good news for Time Warner’s AOL division. It is possible that the company overpaid slightly, but perhaps the international exposure and prominence of Bebo made it worth the price. Regardless, it definitely marks a continued move away from the internet service provider business and towards the much more profitable content provider side of things. Combined, these factors make TWX a stock worth watching!

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Talbots Inc. (NYSE: TLB) announced yesterday that it lost money in the fourth quarter due to a drop in same store sales and charges from the acquisition of J. Jill stores in an 8-K filing with the SEC. For the fourth quarter, Talbots lost over $171 million or $3.23 per share compared to a basically break-even fourth quarter in 2006. Of the $3.23 loss per share, $2.71 was due to a write-down of intangible assets of J. Jill which was purchased in May 2006.

Talbot is specialty retailer and cataloger clothing, specifically children’s and women’s clothing through Talbots Kids and Talbots Misses. The company runs 25 separate catalogs, 140 superstores and 23 outlet stores. Unfortunately for the company, the May 2006 J. Jill acquisition has been less profitable than hoped and necessitated greater write downs because of lower growth and earnings for the brand.

The J. Jill acquisition was designed to update Talbots more traditional lines and drive growth; however, the brand has proved a money drain – not only is growth slower in that line rather than faster than Talbots other brands, but the women’s retail industry as a whole is experience a significant downturn.

The overall health of Talbot stores seem to be in decline with quarterly sales down 8% to $587 million from $638 million. Talbots President and CEO Trudy Sullivan said, “2007 was a difficult year for Talbots, However, we feel very good about the progress we have made, and believe we are well-positioned to succeed in 2008. Despite the challenges of a weak economic environment, we identified and implemented a number of key initiatives to drive improved short- and long-term performance.”

These key initiatives include closing its 78 men’s and children’s stores to focus on its core customer- middle-aged women.
Looking forward, Talbots forecasts 3% revenue growth for 2008 – even assuming “slightly negative” same-store sales growth. To turn the company around, management is going to have to continue closing under performing stores as well as reinvigorate its product offering.

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Fund.com Inc. (OTC: FNDM) set a new world record yesterday after it purchased the domain Funds.com for $9,999,950 in an all-cash transaction, according to an 8-K filing with the SEC. FST Limited decided to part with the domain and associated intellectual property in an purchase agreement dated October 1st of last year, which broke the record previously held by Business.com, which was sold for $7.5 million in 1999. So, what does Fund.com Inc. have planned for this new domain?

According to their 10-K filing with the SEC, Fund.com said that its new web presence will provide customers with free information about investment funds including original, aggregated and community selected articles about the fund industry, statistics on fund performance and other fund-specific detail. The objective is to establish Fund.com as a source of information for individual investors regarding investment funds, including mutual funds, hedge funds, money market funds, exchange traded funds, closed-end funds, commodity funds and other types of pooled investment vehicles.

What does this mean for investors? Fund.com plans to monetize the web property via online advertising, lead generation and referral fees. One of their subsidiaries, Fund.com Managed Products Inc., will also research and develop intellectual property in the form of fund investment indexes and related index-linked investment products and license these to third parties in consideration for recurring license fees paid to them based on a fixed percentage of assets managed by such their parties using their index-linked investment products.

Who will use this service? Fund.com believes that their target market is a multi-trillion dollar industry as reported by the Investment Company Institute (ICI). Hundreds of billions of dollars flow in and out of funds that receive money from individuals and investment firms. Fund.com believes that third party distribution of funds has largely been undertaken by financial advisors with traditional marketing channels, including in-person client meetings with brokers, so these are all marketing efforts that could be augmented with Funds.com.

In the end, the success of Funds.com remains to be seen after the record-breaking purchase. Regardless, this is definitely a stock that is worth watching over the next few months!

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French bank Societe Generale (EPA: GLE) is not having an especially good day. First, the French police raided its headquarters as part of the continuing investigation of rogue trader Jerome Kerviel - specifically, the police were looking into another SocGen employee who had extensive contact with Kerviel though the exact details of the raid have not been released yet.

Meanwhile, in the U.S. shareholder Phillip Barkett brought a lawsuit against the company on the grounds that it misled investors about its subprime loans as well as didn't take proper precautions against the actions of Kerviel. The Missouri resident who brought the suit owned American Depository Receipts of SocGen and allegedly lost $3,100.

The lawsuit, filed in U.S. District Court in Manhattan seeks to represent all purchasers of SocGen ADRs and all U.S. buyers of the bank's shares on any exchange between Aug. 1, 2005, and Jan. 23, 2008. It states that "[SocGen] thus gave investors no warning about the size of [its] losses," and "SocGen had a 'culture of risk' in which risky trading was tacitly permitted."

These allegations all stem from the shocking $7.5 billion in losses that SocGen, France's second largest bank, announced in January. Amazingly, the bank claims that these trades were carried out without its knowledge by 31 year-old Kerviel who was only a junior trader. These problems have only been exacerbated by recent general problems in the world capital markets which caused SocGen to take further losses in February.

SocGen shares are actually up because today's news, compared to that of the last two months, isn't particularly bad for the company - though shares are still trading more than 50% off their 52 week high.

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Washington Mutual, Inc. (NYSE: WM) shares rose today on speculation that Warren Buffett and Goldman Sachs (NYSE: GS) may be preparing to invest in the company. Shares jumped nearly 20 percent yesterday and continued their rise today after falling to a 12-year low earlier in the week. Many investors believe that the cash-rich Buffett may be looking to buy up some cheap financials at these levels and WaMu is definitely on sale! So, is WM a stock worth watching?

Washington Mutual reported its first loss since 1997 in the fourth quarter after itw as forced to write-down the value of its home mortgage unit by $1.6 billion and set aside $1.5 billion to cover bad loans. The bank also said that it would have to put aside $1.8 billion to $2 billion in loss provisions for the first quarter. Meanwhile, WaMu’s credit rating was lower to BBB from BBB+, bringing it just two steps above junk bond status.

Many analysts and investors are concerned about the company’s large exposure to high-risk markets and loan types that are performing poorly. These loans include home-equity lines of credit that have recently begun to see problems in California and other states hit heavily by the mortgage crisis. However, the Central Banks’ recent plan to inject liquidity in these markets combined with efforts to make mortgages more affordable could end up saving them from much of these losses.

Some are speculating that Warren Buffett has already begun building a stake in the company and plans to eventually merge it with his other large holding - Wells Fargo (NYSE: WFC). The idea may seem nothing more than a dream to some, but any such move could result in substantial value being unlocked for shareholders. WaMu shareholders would receive an ample buyout premium while Wells Fargo would get a cheap acquisition in today’s markets. Clearly, if the economy turns, this could become a great deal.

In the end, this is nothing more than a far-fetched rumor, but it is one that is definitely worth watching. Warren Buffett is one of the most popular investors, so his secrets get out more often than others. Whether or not there is any merit to these rumors remains to be seen, but investors should carefully watch for any Schedule 13D or Schedule 13G filings made by the great investor in WaMu!

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Google Inc.’s (NDAQ: GOOG) may have forked over 20 times DoubleClick’s estimated revenues of $150 million, but the acquisition now looks like it could pay off handsomely. The search giant wrapped up the $3.1 billion deal yesterday after it received approval from regulators in the European Union (see story). Many believe that Google will be able to leverage its existing businesses to make this acquisition a huge success. So, is Google a buy now?

Google has always focused on textual advertising as it can be easily quantifiable in terms of sales and is easily integrated into its search engine. However, there is also something to be said for the so-called “display advertising” business that seeks to promote brands more than just generate sales. This is where DoubleClick steps in as it has relationships with virutally every major online publisher and more htan half of the online ad agencies.

The display advertising industry itself is worth around the same as the textual advertising business. The three major players, including Yahoo! (NDAQ: YHOO), Microsoft’s (NDAQ: MSFT) MSN, and Time Warner’s (NYSE: TWX) AOL, brought in over $10 billion in such advertising in 2007. Meanwhile, banners will account for more than 40% of the $19.5 billion expected to go to online advertising this year. All of this compares to a mere $5 billion in revenues from Google from its textual advertising business, in which it is the largest player.

The million dollar question is: How much can Google grow DoubleClick’s business? Many believe the answer to that question is “substantially” given the fact that the search giant already has both a platform and relationships with thousands of publishers and advertisers. The value then becomes very clear: If Google can take a mere 10% market share, it could mean new revenues of well over a billion dollars. Additionally, these revenues would be on a high profit margin, so they would impact the bottom line.

Many investors are hoping that this is the case, since Google’s textual advertising business has been waning lately. The acquisition also gives Google more exposure to different publisher and advertiser demands, meaning that it could convert itself to a one-stop shop for online advertising and squeeze others out of the space. In the end, these factors make GOOG a stock worth watching closely over the next year as investors get a glimpse of just how valuable this acquisition really was!

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Vaalco Energy Inc. (NYSE: EGY) shares were revitalized today after the company’s largest shareholder demanded a sale in a Schedule 13D filing with the SEC. The news comes after shares in the company fell around 30% in 2007 compared to a 45% rise in its peer group during the same period. Meanwhile, the company’s expenditures on failed drilling projects in the North Sea has pushed its valuation down far below where it should stand. So, will this new call to action be heard by management?

Nanes Delorme Partners, which owns an 8% stake, sent a letter to Vaalco’s board expressing its belief that the company is undervalued and suggesting that the best way to unlock value would be to immediately evaluate a range of strategic alternatives. Those familiar with activist investors know that “strategic alternatives” generally just means one alternative - a sale of the company. Such a move could unlock substantial value for shareholders.

Nanes Delorme estimates that the net asset value of Vaalco lies around $420 million, which equates to about $7.12 per share. This represents a substantial 46% premium to its closing price on Tuesday. The activist hedge fund also conveyed the fact that the company had rebuffed private inquiries regarding a potential acquisition several times at substantial premiums to the current share price. This means that there is clearly interest in the company.

As always, there is a reason for this undervaluation that should not be dismissed. Management has been spending cash acquiring and drilling minor North Sea interests that have been total exploration failtures. Recently, this included a $12 million drilling hole that has yielded no oil. These and similar projects have resulted in a substantial cash drain that could continue to destroy value unless someone stops it. Shareholders are now hoping that Nanes Delorme is that someone.

In the end, this is all great news for Vaalco shareholders. Nanes Delorme is committed to unlocking value for all and even went so far as to say that it could bid for the entire company if it felt its concerns were unheard. And why not? If there is already other interest, it could be flipped for a quick profit! Regardless, this is a situation that is definitely worth watching over the next few months!

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Time Warner Inc. (NYSE: TWX) appears to finally be tuning into the idea of a spin off of its cable division. The media company has been conducting a formal review of how to divest its 84% stake in Time Warner Cable (NYSE: TWC), but depressed cable valuations have somewhat limited its options. Interestingly, the proposed spin off was designed more to increase Time Warner Cable’s strategic options than a way to unlock value for shareholders. So, is this a stock worth adding to your portfolio?

Chief executive Jeff Bewkes signaled yesterday that a split between Time Warner and Time Warner Cable may be beneficial for both companies. The executive believes that a separation of the two may spur merger and acquisition interest in the cable company with the parent’s large stake absent in any transaction. Bewkes also commented, wisely, that it doesn’t matter what size Time Warners conglomorate is but rather whether the return on capital is higher.

Spin-offs themselves are also worth watching because they create opportunity through inherent neglect. Studies have shown that spin-offs tend to significantly outperform the S&P 500 in the first two years by as much as 31% in one study. It is worth noting, however, that the optimal time to buy a spin-off is seen as six months after it takes place. Price performance suggests that this is typically an optimal period to buy to realize the maximum price appreciation over the next 12 to 18 months.

Time Warner Cable is the second largest cable operator in the United States behind Comcast Corporation (NYSE: CMCSA), serving around 14.6 million customers in 33 states. The division also delivers high speed internet services to over 7.4 million residential customers and a growing number of businesses and digital phone services to approximately 2.6 million customers. The cable division is also widely accredited for leading the industry in deploying Video on Demand via subscriptions.

So, will a spin off unlock value for shareholders? The spin off will leave Time Warner Cable much cheaper and more readily available for acquisition while a the spin off may also result in substantial value inherently being unlocked. In the end, these factors make CMCSA a stock worth watching!

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The Boeing Company (NYSE: BA) isn’t happy about the U.S. Air Force’s recent decision to award European competitor Northrop Grumman (NYSE: NOC) with a major military contract and it is throwing a very public fit. The aerospace company called the competition for its air tanker contract “seriously flawed” and even so far as to say that the Air Force selected the “wrong airplane” for the warfighter. The move highlights the increasing concerns surrounding military contracts and could result in some widespread industry and governmental changes.

“This is an extraordinary step rarely taken by our company, and one we take very seriously. Based upon what we have seen, we continue to believe we submitted the most capable, lowest risk, lowest (cost) … airplane,” said Jim McNerney, chairman, president and chief executive officer of Chicago-based Boeing. Program manager Mark McGraw added, “Our analysis of the data presented by the Air Force shows that this competition was seriously flawed and resulted in the selection of the wrong airplane for the warfighter.”

Boeing filed a formal protest with the U.S. Government Accountability Office (GAO) regarding the airforce’s decision charging that the Air Force changed the rules for choosing the tanker during the course of the competition, which resulted in the Air Force choosing an inferior plane. Coincidentally, without the contract, Boeing may be forced to shut down its 767 line in Everett by 2012. So, while Boeing has portrayed the government as at fault, it could have other motives.

Let’s not forget when former Boeing chief financial officer Michael Sears received four months in prison for illegally negotiating a $250,000-a-year job for an Air Force contracting officer while she held sway over a potential multibillion-dollar contract sought by the aircraft manufacturer. Then again, problems are hardly limited to Boeing. Many major players in the defense industry have built strong bonds with Air Force personnel in order to sway decision-making.

The apparent corruption in government military contracting has been a much heated debate that is just starting to receive the attention that it should from lawmakers. These regulators are now looking for ways to better control the process and open it up to as many bidders as possible to get the best price possible. Whether or not these decisions will yield any real results remains to be seen, but this event certainly adds gas to the fire!

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