Item 1.01 Entry into a Material Definitive Agreement
On August 17, 2020, Take-Two Interactive Software, Inc., a Delaware corporation
(the "Company"), entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Playdots, Inc., a Delaware corporation ("Playdots"), Dash MS,
LLC, a Delaware limited liability company ("Merger Sub"), Dash MS II, LLC, a
Delaware limited liability company ("Merger Sub II"), and Shareholder
Representative Services LLC, as Stockholder Representative.
On the terms and subject to the conditions set forth in the Merger Agreement,
(i) Merger Sub will merge with and into Playdots (the "First Merger"), with
Playdots surviving the First Merger as a direct wholly-owned subsidiary of the
Company, and (ii) immediately following the effective time of the First Merger,
Playdots will merge with and into Merger Sub II (the "Second Merger" and,
together with the First Merger, the "Mergers"), with Merger Sub II surviving the
Second Merger as a direct wholly-owned subsidiary of the Company. It is expected
that the Mergers will be treated as a tax-free reorganization for U.S. federal
income tax purposes.
Merger Consideration
The base purchase price for Playdots' outstanding equity interests, excluding
unvested equity awards, is $192 million, consisting of a combination of
$90 million in cash and $102 million in shares of common stock, par value $0.01
per share ("Common Stock"), of the Company, valued based on the average closing
price per share of the Common Stock on the Nasdaq Global Select Market during a
specified period preceding the closing date, subject to a post-closing working
capital adjustment. In addition, at the effective time of the First Merger,
Playdots' unvested equity awards will be converted into corresponding unvested
equity awards with respect to shares of the Common Stock (the "Converted
Awards") pursuant to an exchange ratio that is designed to maintain the
intrinsic value of the award immediately prior to the effective time of the
First Merger. Following the effective time of the Mergers, the Converted Awards
will vest based on continued service and will continue to be governed by
substantially the same terms and conditions as were applicable to the
corresponding Playdots equity awards prior to the effective time of the First
Merger.
Conditions to the Mergers
The closing of the Mergers is subject to the satisfaction or waiver of customary
closing conditions for both parties, including (i) the adoption of the Merger
Agreement by the requisite approval of the stockholders of Playdots, (ii) the
expiration or termination of applicable waiting periods, including any extension
thereof, under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as
amended, to the extent the parties mutual agree that such approval is required
under applicable law, (iii) the absence of any law or order by any governmental
authority that enjoins or otherwise prohibits the consummation of the Mergers
and (iv) the absence of any legal challenge instituted by any governmental
authority which seeks to enjoin or otherwise prohibit, or which questions the
validity or legality of, the consummation of the Mergers. In addition, the
obligation of each of the Company and Playdots to consummate the Mergers is
conditioned on the accuracy of the representations and warranties made by the
other party on the Closing Date (as defined in the Merger Agreement) or, if
applicable, an earlier date (subject to certain "materiality" and "material
adverse effect" qualifications set forth in the Merger Agreement with respect to
such representations and warranties), and the performance by the other party in
all material respects of its obligations under the Merger Agreement.
Certain Other Terms of the Merger Agreement
The Merger Agreement provides for certain termination rights for both the
Company and Playdots, including, among other things, (i) by mutual consent of
the parties, (ii) by either party if the Mergers are not consummated on or
before November 30, 2020 (the "Outside Date"), (iii) by either party in the
event that any governmental authority shall have issued a final and
non-appealable order enjoining or otherwise prohibiting the consummation of the
Mergers, (iv) by either party in the case of certain breaches of the other
party's representations and warranties that would result in the failure of a
closing condition and such breach is not cured within a specified period or is
not capable of cure sufficient to allow satisfaction of the closing conditions
prior to the Outside Date and (v) by the Company if the requisite Playdots
stockholder approval is not received.
The Merger Agreement contains customary representations and warranties made by
each of the Company and Playdots, and also contains customary pre-closing
covenants applicable to the conduct of business of Playdots, including to
operate its business in the ordinary course consistent with past practice in all
material respects and to refrain from taking certain action without the
Company's prior consent. In addition, in the Merger Agreement, the Company has
agreed to file, on the Closing Date, a registration statement on Form S-3 with
the Securities and Exchange Commission, registering the resale from time to time
of the shares of the Common Stock to be issued to the Playdots stockholders at
the consummation of the First Merger.
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The foregoing description of the Merger Agreement and the transactions
contemplated thereby does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement, which is filed as Exhibit 2.1 to
this Current Report on Form 8-K, and is incorporated by reference herein. The
Merger Agreement has been included to provide investors and securityholders with
information regarding its terms. It is not intended to provide any other factual
information about the Company, Playdots or their respective subsidiaries and
affiliates. The Merger Agreement contains representations and warranties of each
of the Company, Merger Sub and Merger Sub II, on the one hand, and Playdots, on
the other hand, made solely for the benefit of the other. The assertions
embodied in those representations and warranties are qualified by information in
confidential disclosure schedules that the parties have exchanged in connection
with signing the Merger Agreement. The disclosure schedules contain information
that modifies, qualifies and creates exceptions to the representations and
warranties set forth in the Merger Agreement. Moreover, certain representations
and warranties in the Merger Agreement were used for the purpose of allocating
risk between the Company, Merger Sub and Merger Sub II, on the one hand, and the
Playdots shareholders, on the other hand. Accordingly, investors and
securityholders should not rely on the representations and warranties in the
Merger Agreement as characterizations of the actual state of facts or condition
of the Company, Playdots or their respective subsidiaries or affiliates.
Moreover, information concerning the subject matter of the representations,
warranties and covenants may change after the date of the Merger Agreement,
which subsequent information may or may not be fully reflected in public
disclosures.
Item 7.01 Regulation FD Disclosure.
On August 18, 2020, the Company issued a press release announcing the entry into
the Merger Agreement, as described above under Item 1.01 of this Current Report
on Form 8-K. A copy of the press release is attached hereto as Exhibit 99.1 to
this Current Report on Form 8-K and is incorporated by reference into this Item
7.01. The information in Item 7.01 of this Current Report on Form 8-K, including
Exhibit 99.1 furnished pursuant to Item 9.01, shall not be deemed "filed" for
the purposes of Section 18 of the Securities Exchange Act of 1934, as amended,
or otherwise subject to the liabilities under that Section. Furthermore, the
information in Item 7.01 of this Current Report on Form 8-K, including
Exhibit 99.1 furnished pursuant to Item 9.01, shall not be deemed to be
incorporated by reference into the filings of the Company under the Securities
Act of 1933, as amended.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
EXHIBIT
NO. DESCRIPTION
2.1 Agreement and Plan of Merger, dated as of August 17, 2020, by and
among Take-Two Interactive Software, Inc., Dash MS, LLC, Dash MS II,
LLC, Playdots, Inc. and Shareholder Representative Services LLC, as
Stockholder Representative †
99.1 Take-Two Interactive Software, Inc., Press Release, dated
August 18, 2020.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
† Schedules omitted pursuant to item 601(b)(2) of Regulation S-K. The Company
agrees to furnish supplementally a copy of any omitted schedule to the SEC upon
its request.
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