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Nintendo was offered to buy the company first, and declined. That has been stated in interviews numerous times. The fact is, Nintendo was pretty ticked off by the lack of production from RARE in the gamecube years, so when the Stamper Brothers wanted to sell, the company was in trouble already.

I've only enjoyed one of their xbox games: Viva Pinata. And it could never sell well, if just because of their ecology system: Having carnivores meant that it was very hard to form any attachment with any animal. Everything else they've made since has been junk.