Andrew Ross Sorkin and Seth Schiesel, February 25, 2008

Electronic Arts, the video gaming giant, made an unsolicited $2 billion bid on Sunday for rival Take-Two Interactive, publisher of the Grand Theft Auto franchise, a deal that would further a wave of consolidation in the rapidly growing industry.

Electronic Arts, which publishes hit games like the Madden N.F.L. and Need for Speed series, offered to pay $26 a share for Take-Two, a 50 percent premium over its share price of $17.36 on Friday. The offer was made publicly after a series of private offers to Take-Two were rejected by its board.

Electronic Arts approached Take Two with a $26-a-share offer on Feb. 19, up from $25 share it initially offered on Feb. 15.

The timing of the bid appears to be an attempt to acquire Take-Two before it releases what is widely expected to be the top-selling game of 2008, the fourth installment of the crime thriller Grand Theft Auto. The Grand Theft Auto franchise, Take-Two’s crown jewel, has sold more than 60 million copies since Grand Theft Auto III took the game industry by storm in 2001.

Through its Rockstar subsidiary, Take-Two is scheduled to release the game on April 29 for Microsoft’s Xbox 360 and Sony’s PlayStation 3 consoles. If it lives up to consumers’ expectations, the game is expected to sell 10 million copies or more by the end of the year, which would almost certainly make Take-Two more expensive.

Electronic Arts’s dominance has been strongly challenged by Activision. Not only has Activision had a recent string of hits, notably Guitar Hero, it also recently agreed to buy Vivendi’s game division to form a company called Activision Blizzard.

At the same time, E.A. has endured a growing chorus of criticism from some investors who say the company has lost its creative and innovative edge.

There is little doubt that E.A. remains the juggernaut of the video game industry. But it has come to rely heavily on sequels.

A merger with Take-Two would be a union of two vastly different companies. E.A. has a reputation for steady growth and fiscal discipline, while Take-Two is known as a mercurial one-hit wonder.

Electronic Arts said it was making its offer public to “bring its proposal to the attention of all Take-Two shareholders.” In a telephone interview on Sunday, Electronic Arts’ chief executive, John Riccitiello, said, “It is an enormous premium,” suggesting that rather than consider the offer hostile, “We think of ourselves as a ‘white knight.’ ”

Take-Two was far less generous. In a statement, Strauss Zelnick, the company’s chairman, said, “Electronic Arts’ proposal provides insufficient value to our shareholders and comes at absolutely the wrong time given the crucial initiatives under way at the company,” referring to the new Grand Theft Auto and other products.

Mr. Riccitiello said, however, he believed that Take-Two’s stock price already reflected an expectation among investors that Grand Theft Auto IV would be a success, and that Take-Two would become less valuable to E.A. after the game’s introduction than it was now.

Mr. Riccitiello said his offer’s timing reflected a desire to integrate Take-Two’s operations with E.A.’s before the all-important holiday shopping season. He said he had formed a relationship in recent years with Sam Houser, one of Rockstar’s founders, but added that he had avoided contacting Mr. Houser while pursuing his negotiations with Mr. Zelnick.

Mr. Zelnick said that Take-Two had offered to initiate discussions with Electronic Arts on April 30, the the day after Grand Theft Auto IV was scheduled for release. “We believe this offer demonstrated our commitment to pursuing all avenues to maximize stockholder value, while we believe that E.A.’s refusal to entertain this path is evidence of their desire to acquire Take-Two at a significant discount,” he said.Mr. Riccitiello refused to speculate about what steps he would take next, but it is possible that Electronic Arts could pursue a proxy contest to oust the board.

Over the next several weeks, Mr. Riccitiello’s main challenge will be to persuade investors to accept the deal and convince employees that Electronic Arts will respect the creative autonomy of Take-Two’s various development teams. Over the last decade, E.A. has acquired many high-profile game studios, including Westwood (the Command & Conquer series), Bullfrog Productions (Populous) and Origin Systems (Ultima), which essentially dissolved after Electronic Arts tried to direct and homogenize their creative output.

Any deal for Take-Two would be largely empty if Take-Two teams like Rockstar and Ken Levine’s group at 2K Boston, which recently released the acclaimed game BioShock, were to depart rather than work for E.A.

Mr. Riccitiello seems aware of the danger and is taking steps to convince the game industry of E.A.’s newfound respect for creative talent. At a well-received speech at an industry conference in Las Vegas earlier this month Mr. Riccitiello promised that in future deals, Electronic Arts would avoid killing the creative golden goose as it has in the past.