EA drops hostile Take-Two bid and enters talks announces EA's attempted hostile takeover of Take-Two is ended (thanks Mike Martinez), and as implied by the announcement earlier today (story), Take-Two and EA are now engaged in negotiations:

NEW YORK (Reuters) - Electronic Arts Inc (ERTS.O) will drop its hostile $2 billion bid for rival video game publisher Take-Two Interactive Software Inc (TTWO.O) on Monday and instead pursue private talks with the company.

While shares of Take-Two fell 4 percent on the specter that EA might walk away entirely, or come back with a lower bid, analysts said a deal was more probable now that friendly talks were in the offing.

EA said on Monday its chief executive, John Riccitiello, and Take-Two Executive Chairman Strauss Zelnick held talks over the weekend, and Take-Two's management has agreed to present its three-year product pipeline and financial forecasts to EA.

"I think EA called Take-Two and said 'you can either participate or not,"' said Wedbush Morgan Securities analyst Michael Pachter. "I think Take-Two ... is going to negotiate a dollar (per share) higher and then claim victory. A deal is going to get done."

EA, publisher of the popular "Madden," "Need for Speed" and "Rock Band" games, had in April offered $25.74 per share for Take-Two, which rejected the price as too low.

With no chance to add Take-Two's blockbuster "Grand Theft Auto" game to EA's roster before the holiday shopping season, EA said it was taking a second look at its offer price.

"That $25.74 was predicated on distributing their products at Christmas this year," EA spokesman Jeff Brown said. "Going forward, we are challenged to validate that $25.74 price."

Take-Two shares fell 77 cents to $24.07 in midday trading on Nasdaq. The stock stood at around $17 in February, just before EA's first offer was announced. EA shares were off $1, at $47.24 on Nasdaq.