Sept. 15 (Bloomberg) -- Take-Two Interactive Inc., the maker of the top-selling ``Grand Theft Auto'' video games, plunged the most in almost seven years in Nasdaq Stock Market trading after Electronic Arts Inc. ended takeover talks.

Take-Two fell $5.32, or 24 percent, to $16.57 at 4 p.m. New York time, the biggest drop since December 2001. Electronic Arts declined $1.69, or 3.8 percent, to $43.30.

Electronic Arts said yesterday it won't make a proposal to buy Take-Two after considering management presentations and other due-diligence materials. Last month, Redwood City, California- based Electronic Arts had agreed to talk with Take-Two and drop its $2 billion hostile bid for the New York-based game maker.

Take-Two has declined from a high of $27.65 on June 5 as investors deemed it less likely that Electronic Arts would make a higher offer or succeed in the previous unsolicited bid of $25.74 a share. With today's decline, the stock is lower than its $17.36 close on Feb. 22, the last trading day before Electronic Arts first disclosed its interest in the company.

``It boils down to price negotiations and the two companies not being able to come to terms,'' said Arvind Bhatia, a Dallas- based analyst with Sterne Agee & Leach Inc. He has a ``hold'' rating on Take-Two and suggests buying Electronic Arts shares.

Bhatia, in a note to investors today, cut his target price on Take Two to $18 from $26 and said the game maker's management ``made a strategic mistake'' by not reaching an agreement with Electronic Arts.

`Actively Engaged'

Take-Two is ``actively engaged'' in talks with other parties to consider strategic options, Chairman Strauss Zelnick said in a statement yesterday. In an interview, he declined to identify those involved in the discussions.

``We've never been in an auction mode; we've been in the mode to consider our strategic alternatives,'' Zelnick said. ``We thought the steps Electronic Arts took were unfortunate.''

Electronic Arts took its earlier offer for Take-Two directly to shareholders after management rejected purchase attempts. Electronic Arts had aimed to complete a merger in time to capture holiday sales of ``Grand Theft Auto IV.''

``It was a well-informed decision,'' said Owen Mahoney, senior vice president of corporate development at Electronic Arts, in a telephone interview. ``We don't need Take-Two to make EA successful.''

Electronic Arts is executing its three-year strategy and sees its future as ``bright,'' having just shipped its ``Spore'' game and nearing the release of its ``Warhammer'' online game, Mahoney said.

`Grand Theft Auto'

Take-Two released ``Grand Theft Auto IV'' in April, the latest in a game series that centers around crime, violence and car chases. With sales of that version now trailing off, Take-Two may no longer be worth as much to Electronic Arts, said Todd Mitchell, an analyst at Kaufman Bros. in New York. He has ``hold'' recommendations on both companies.

``This deal was very accretive when EA announced it,'' Mitchell said. ``Now we're past that. What have they got next year? It's not clear. They haven't flushed out their lineup.''

Take-Two reported a third-quarter profit on Sept. 4 that exceeded analysts' projections on sales of ``Grand Theft Auto IV.'' The surge led Take-Two to lower its profit outlook for the quarter ending Oct. 31 and raise the full-year projection, Chief Executive Officer Ben Feder said at the time.

Electronic Arts in July reported a wider first-quarter loss than analysts had estimated and cut its annual profit forecast because of tax-accounting changes. The company lost its status as the world's largest video-game maker with the creation of Activision Blizzard Inc. this year.

To contact the reporter on this story: Gillian Wee in New York at gwee3@bloomberg.net.

Last Updated: September 15, 2008 16:16 EDT