The last big video game to hit stores was "Halo 3" which was discussion point here long, long ago. If you haven't yet heard, the next big game that is making its way through the homes of unsuspecting parents is "Grand Theft Auto IV." It is supposed to be the most popular game of the year, maybe ever. Thus far it has sold $400 million in the first week.

The news prompted me to take a look at the gaming industry. Gaming hardware is primarily developed by MSFT (Xbox), SNE (Playstation), and NTDOY (Wii). Gaming software companies include TTWO (GTA 4), ATVI (Guitar Hero) and ERTS (Various sport games). However, there has been a consolidation within this space. ATVI was purchased by Vivendi several months ago, and ERTS has an ongoing offer to purchase TTWO, which has been pushed back to the release of this new game; GTA 4. Here is what I read on Forbes this morning...

Take-Two Interactive Software (nasdaq: TTWO ) has fended off advances from Electronic Arts (nasdaq: ERTS ) since the beginning of the year when the gamer offered $26 per share in a deal that valued Take-Two at $1.9 billion. The New York-based software company has repeatedly said that the deal undervalues it and that it would wait until the launch of GTA4 before entering discussions with anyone. Electronic Arts has responded by continually pushing back the deadline for the deal and even lowering the offer price to $25.74 per share. The deal is now set to expire on May 16.

Take a look at the chart of TTWO. It is trading at a premium compared to the EA offer of $25.74, and I have illustrated it's colorful history...

Here is a shot of EA, which doesn't look all that bad either.

I am keeping a close eye on this deal as its expiration nears. If you are a gambler, there might be a little arbitrage opportunity in this deal. The last situation we examined like this was BSC, and how their shares were trading much higher than the first tender offer. Perhaps we are seeing another deal that is setting up to be bid higher.

Sooner than later I am looking to acquire stock in one company or the other. I'll keep you posted.