(Recasts first paragraph with Icahn's return on investment; adds analysts' quotes and details)
By Sinead Carew and Malathi Nayak
NEW YORK/SAN FRANCISCO, Nov 26 (Reuters) - Activist investor Carl Icahn will sell all his shares in Take-Two Interactive Software Inc back to the videogame company, netting a fat return on his investment in the "Grand Theft Auto" publisher.
Three directors nominated by the billionaire have resigned as part of the deal, under which Take-Two will pay $203.5 million in cash or cash equivalents for the 12.02 million shares Icahn owns, or about a 13 percent stake.
Take-Two shares slid 5.4 percent to close at $16.01. The company expects the transaction to close on Tuesday.
Icahn has reaped an annualized return of 15 percent since 2010, when he first placed his own nominees onto the company's board, according to a study by Icahn Enterprises LP that was released on Tuesday.
Icahn, known for buying big stakes in companies and pushing for corporate strategy or management change, reported an increase in his stake in Take-Two to 12.9 percent from 11.69 percent a year ago, when the stock was trading below $12. The stock hit a roughly five-year high of $19.25 in August.
In September, Take-Two scored an industry record after "Grand Theft Auto V" raked in $1 billion in sales in just three days after it was released for Sony Corp's PlayStation 3 and Microsoft Corp's Xbox 360.
The company, also known for the "BioShock Infinite" and "Red Dead Redemption" games, has yet to reveal its product line for the just-launched PlayStation 4 and Xbox One consoles.
Take-Two Chief Executive Officer Strauss Zellnick has said his company has 10 games in the works without providing details.
"The issue for Take-Two always is what's next?" Hudson Square research analyst Daniel Ernst said. "They have a great game (in Grand Theft Auto) and then people never have visibility on what the slate looks like."
Take-Two and Icahn agreed several years ago that, if the billionaire investor ever sold his position, his board designees would resign. Brett Icahn, Jim Nelson and SungHwan Cho have left the board, Take-Two said on Tuesday.
The company said it bought the stock at Monday's closing price of $16.93 per share, reflecting confidence it will reach its target and report record results in fiscal 2014. Moreover, Zellnick has said the company expects to deliver continued non-GAAP profitability in fiscal 2015 and future years.
Some investors might have expected the company to be acquired after Icahn became involved, he said.
But "a sale was never a possibility to begin with," Ernst said, adding it was unlikely that big media companies, which are tackling distribution problems, or Take-Two's U.S. rivals, Activision Blizzard Inc and Electronic Arts Inc, would buy the games company.
"Activision just borrowed money to buy back its shares from Vivendi and EA made big bets in social and mobile game companies that didn't pan out," Ernst said.
Icahn's decision to opt out of Take-Two might, "signal that he doesn't believe a sale of the company is likely," Wedbush Securities analyst Michael Pachter said in a research note. (Reporting by Sinead Carew in New York and Malathi Nayak in New York.; Additional reporting by Samuel Foginoe in New York.; Editing by Gerald E. McCormick, Lisa Von Ahn and Andre Grenon)