Take-Two will purchase all outstanding shares of Zynga for a total value of $9,861 per share. That’s $12.7 billion in corporate value, $3.50 in cash, and $6,361 in Take-Two stock.
The transaction represents a 64% valuation based on Zynga’s closing share price on January 7, 2022.
With this move, Take-Two aims to become one of the biggest mobile games publishers, the fastest-growing segment of the interactive entertainment industry. Two leading companies are merging, including Take-Two’s best-in-class console and PC games portfolio and Zynga’s industry-leading mobile games.
It forms one of the world’s largest publicly traded interactive entertainment companies with US$6.1 billion in twelve-month pro forma Net Bookings for the period ending September 30, 2021. The transaction is expected to deliver approximately $100 million of annual cost synergies in the first two years after closing and more than $500 million of annual Net Reservations over time.
Take-Two Interactive and Zynga, two leaders in interactive and mobile entertainment, announced today that Take-Two has entered into a definitive agreement to acquire all outstanding shares of Zynga in cash and equity transactions at $9,861 per share. According to market close as of January 7, 2022, Zynga’s total business value is approximately $12.7 billion. Subject to the terms and conditions of the agreement, Zynga shareholders will receive $3.50 in cash and $6,361 in Take-Two common stock for each Zynga common stock available at the close of the transaction. The purchase price represents a 64% value to Zynga’s closing share price on January 7, 2022.
This transformative combination brings together two global leaders in the interactive entertainment industry, making Take-Two one of the industry’s largest and most diverse mobile game publishers, with sales of $6.1 billion for the twelve months ending September 30, 2021.
Both companies have created and expanded iconic franchises that will form one of the industry’s largest and most diverse portfolios of intellectual property. The brands of Take-Two, which includes big names, are as follows;
- Grand Theft Auto®
- Red Dead Redemption®
- Midnight Club®
- NBA 2K®
- Kerbal Space Program®
Zynga’s portfolio includes the following games;
- CSR Racing™
- Empires & Puzzles™
- Golf Rival™
- Hair Challenge™
- Harry Potter: Puzzles & Spells™
- High Heels™
- Merge Dragons!™
- Toon Blast™
- Toy Blast™
- Words With Friends™
- Zynga Poker™
Comments from managers
Strauss Zelnick, Chairman and CEO of Take-Two, gave the following words in his speech about the acquisition;
“We are thrilled to announce our transformative transaction with Zynga, which significantly diversifies our business and establishes our leadership position in mobile, the fastest growing segment of the interactive entertainment industry, This strategic combination brings together our best-in-class console and PC franchises, with a market-leading, diversified mobile publishing platform that has a rich history of innovation and creativity. Zynga also has a highly talented and deeply experienced team, and we look forward to welcoming them into the Take-Two family in the coming months. As we combine our complementary businesses and operate at a much larger scale, we believe that we will deliver significant value to both sets of stockholders, including $100 million of annual cost synergies within the first two years post-closing and at least $500 million of annual Net Bookings opportunities over time.”
Frank Gibeau, CEO of Zynga, made the following comments about the acquisition;
“Combining Zynga’s expertise in mobile and next-generation platforms with Take-Two’s best-in-class capabilities and intellectual property will enable us to further advance our mission to connect the world through games while achieving significant growth and synergies together, I am proud of our team’s hard work to deliver a strong finish to 2021, with one of the best performances in Zynga’s history. We are incredibly excited to have found a partner in Take-Two that shares our commitment to investing in our players, amplifying our creative culture, and generating more value for stockholders. With this transformative transaction, we begin a new journey which will allow us to create even better games, reach larger audiences and achieve significant growth as a leader in the next era of gaming.”
Strategic reasons and investing in shareholder values
As Zynga’s shareholders receive approximately 64.5% of the transaction value in Take-Two stock, both shareholder groups will benefit from the combined company’s enhanced financial profile and synergies created through the transaction.
The combined company is well-positioned to capitalize on the strong headwinds of the interactive entertainment industry, including a leadership position in mobile. The video game industry has experienced rapid growth over the past few years and is now the largest vertical in the entertainment industry. Mobile gaming is the fastest-growing segment in the industry, with an estimated $136 billion in gross profits in 2021 and an expected CAGR of 82% over the next three years.
The transaction is expected to position Take-Two as a leader in mobile games. The mobile category is expected to account for more than 50% of the company’s net sales in the Fiscal Year 2023 (compared to an estimated 12% in Fiscal Year 2022). The transaction supports Take-Two’s mobile portfolio, which includes popular games such as Dragon City, Monster Legends, Top Eleven, Two Dots, WWE SuperCard, and games including casual, hyper-casual, lifestyle, mid-core, puzzle, gambling, and sports games. The focus will be on a wide variety of fun, focusing on many of the most popular genres in the world.
The transaction will create a robust and diverse portfolio of industry-leading games, spanning key platforms and genres across interactive entertainment, developed by the most creative and forward-thinking talents in the industry. By sharing company-wide best practices and critical data insights, the Company is expected to capitalize on significant development and release synergies, unlock new revenue streams, and reach new audiences worldwide.
Strauss Zelnick will continue to serve as President and CEO at the end of the transaction, and Take-Two’s management team will lead the combined company. The highly skilled and proven management team formed by Zynga’s Frank Gibeau and Zynga’s Head of Publishing Bernard Kim will lead the strategic direction of Take-Two’s mobile efforts and oversee the company’s daily operations. Additionally, Take-Two will add two members upon completion of the transaction, increasing the Zynga Board of Directors to 10 members.
About Take-Two Interactive Software Inc.
They are headquartered in New York, Take-Two Interactive Software Inc. It is a publisher and marketer and one of the leading developers in interactive entertainment, reaching all over the world. Its products are mainly developed and published through Rockstar Games, 2K, Private Division, and T2 Mobile Games. The products are designed for console systems, personal computers, and mobile devices, including smartphones and tablets. They are available to users through physical retail, digital download, online platforms, and cloud streaming services.
Zynga is a company focused on mobile game development to connect the world through games. With a massive global reach in more than 175 countries and regions, Zynga offers CSR Racing™, Empires & Puzzles™, FarmVille™, Golf Rival™, Hair Challenge™, Harry Potter: Puzzles & Spells™, High Heels!™, Merge Dragons !™ has a diverse portfolio of popular games with over four billion downloads on mobile devices, including Merge Magic!™, Toon Blast™, Toy Blast™, Words With Friends™ and Zynga Poker™. Founded in 2007, Zynga is headquartered in California and has offices in North America, Europe, and Asia.