Take-Two Interactive has entered into a definitive agreement to acquire Zynga, one of the largest mobile gaming publishers around, for $12.7 billion in cash and stock.
Take-Two is best known for its pair of major console and PC games publishing brands: 2K and Rockstar Games. 2K itself is most recognizable for its various sports game franchises such as NBA 2K, PGA Tour 2K, and WWE 2K, as well as AAA games like Bioshock, Borderlands, and X-Com. Meanwhile, Rockstar is one of the most successful developers in gaming today thanks to its Grand Theft Auto series and other popular titles like the Red Dead series, Midnight Club Racing, and Max Payne.
Zynga comes from the other side of the gaming coin, focusing entirely on the mobile market with hit titles like FarmVille, Harry Potter: Puzzles & Spells, Words With Friends, and others.
The transaction is valued at $9.96 per share of Zynga stock, with all Zynga shareholders set to receive $3.50 in cash and $6.36 in shares of Take-Two common stock for each share of the mobile game developer they own. Take-Two noted that this represents a 64% premium over Zynga's closing share price on the most recent day of trading prior to the announcement.
Assuming the deal closes as planned, the combined company will be one of the largest gaming firms in the world, with Take-Two predicting $6.1 billion in pro-forma bookings by next September and "at least $500 million of annual Net Bookings opportunities over time." $100 million in annual cost synergies are also expected.
In addition to the financial reasoning behind the deal, Take-Two noted the creative opportunities it presents, including the chance to bring any or all of the aforementioned PC and console gaming franchises to smartphone and tablet audiences through Zynga's experience as a mobile game developer.
Following the planned closure, Take-Two's senior leadership is expected to remain largely unchanged, with Strauss Zelnick still serving as Chairman and CEO. Zynga's management team will be led by Frank Gibeau and Zynga's President of Publishing, Bernard Kim. The duo will also be responsible for the "strategic direction for Take-Two's mobile efforts and will oversee the integration, and day-to-day operations of the combined Zynga and T2 Mobile Games business." Take-Two Interactive said that the Zynga brand name will be expanded to encompass all of its mobile gaming efforts.
The agreement has already received unanimous approval from the Boards of Directors of both companies. However, the terms of the deal do include a 45-day "go-shop" provision, which will allow Zynga to consider offers from competing suitors until February 24, 2022.
Assuming no superior offers are presented and accepted, the combination of Take-Two and Zynga is expected to close during the first quarter of Take-Two's 2023 fiscal year, which ends June 30, 2022. Stockholder and regulatory approvals will also need to be secured by that time.