Analyst: Take-Two Bond Issuance Could Indicate Coming Mobile/Social Acquisition

Wedbush analyst Michael Pachter thinks Take-Two's recent issuance of $200 million in debt securities may indicate a coming mobile or social acquisition. Take-Two announced its issuance of the private, convertible senior notes this morning, and the publisher will be expected to pay off the bonds in June of 2016. While precise terms of the issuance weren't discussed, Pachter said the particulars of the deal suggest a low interest rate. Since the profitable Take-Two already has enough cash on hand to easily handle outstanding debt that's not due until 2014, Pachter believes the proceeds from the note issuance "can only be intended for acquisitions or strategic investments," likely in the growing mobile and social spaces. In justifying the prediction, Pachter also notes that digital content accounted for a full 25 percent of Take-Two's net revenue in its most recent fiscal quarter, and that the company has consistently considered digital a key area of growth. Take-Two has already tested the waters of the social gaming space, as wholly-owned studio Firaxis launched CivWorld, which has seen declining numbers on Facebook. CEO and chairman Strauss Zelnick said during an earnings call this week, "Stay tuned, we have a lot more to say about social gaming in the coming months." Take-Two wouldn't be the first major publisher to seek growth through digital acquisitions: EA's recent purchases of Playfish and Popcap have led analysts to predict the company will beat projections of $1 billion in digital revenue this fiscal year. The inflow of cash to Take-Two is not likely to affect the launch timing of Grand Theft Auto V, Pachter said, which he expects could come as early as next May.