TLL Editor in Chief
Almost buried under the flurry of news about Microsoft’s landmark acquisition of Activision Blizzard, Take Two’s merger with Zynga is also a key moment for the video gaming industry.
Take-Two Interactive, the producer of Grand Theft Auto, has acquired Farmville creator Zynga for $12.7 billion, creating a new behemoth in the industry.
“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,” said Strauss Zelnick, Chairman and CEO of Take-Two. “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.”
Zelnick said the deal unifies two global leaders in the interactive entertainment business, and establishes Take-Two as one of the largest and most diversified mobile game publishers in the industry, with $6.1 billion in pro-forma Net Bookings for the trailing 12-month period ended Sept. 30, 2021.
Zynga CEO Frank Gibeau says the merger creates an ideal synergy between Zynga’s expertise in mobile with Take Two’s focus on console and PC gaming.
“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,” said Gibeau. “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.”
Under the announced deal, Take-Two will acquire all of the outstanding shares of Zynga in a cash and stock transaction valued at $9.861 per Zynga share, based on the market close as of Jan. 7, 2022, with a total enterprise value of approximately $12.7 billion.
Under the terms and subject to the conditions of the agreement, Zynga stockholders will receive $3.50 in cash and $6.361 in shares of Take-Two common stock for each share of Zynga common stock outstanding at the closing of the transaction. The purchase price represents a premium of 64% to Zynga’s closing share price on Jan. 7, 2022.
The video gaming space is seeing a hot streak of acquisitions over recent years, as the sector has easily outpaced traditional TV, streaming, film box office and music in terms of long-term revenue growth for the past two decades. Video gaming now generates more revenue than TV and film combined.
Take Two and Zynga are also two of the biggest horses in the stable. Take Two is responsible for some of the most legendary and profitable games in the industry, including Grand Theft Auto, Red Dead Redemption, Midnight Club, NBA 2K, BioShock, Borderlands, Civilization, Mafia, and Kerbal Space Program, while Zynga’s portfolio includes renowned titles, such as CSR Racing, Empires & Puzzles, FarmVille, Golf Rival, Hair Challenge, Harry Potter: Puzzles & Spells, High Heels! , Merge Dragons!, Toon Blast, Toy Blast, Words With Friends, and Zynga Poker.
Zelnick says that rich library of content will result in strong financial results right from the start of the company’s relationship. “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,” Zelnick said. “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.”
Zelnick also points out that mobile gaming is the fastest growing segment within the industry, with an estimated $136 billion in gross bookings in 2021, and an expected compound annual growth rate of 8% over the next three years.
The transaction is expected to establish Take-Two as a leader in mobile gaming, with mobile expected to comprise over 50% of its Net Bookings in Fiscal Year 2023, as compared to an estimated 12% in Fiscal Year 2022. The transaction will bolster Take-Two’s mobile offerings, which include popular games such as Dragon City, Monster Legends, Top Eleven, Two Dots, and WWE SuperCard, and consist of a diverse array of titles that focus on many of the most popular genres in mobile gaming, including casual, hyper-casual, lifestyle, mid-core, puzzle, social casino and sports games.
Additionally, the merger means that the mobile side will also profit from the rich content developed by Take-Two over the years, as these properties can now be offered on every platform.
“Take-Two has an extensive catalog of commercially and critically successful console and PC titles with engaged and loyal communities of players, and there is a meaningful opportunity to create mobile games and new cross-platform experiences for many of these properties,” the companies said in a statement. “Zynga’s nearly 3,000 employees include highly-talented mobile developers, paving the way for Take-Two to accelerate this strategic initiative and introduce its iconic intellectual properties across the fastest-growing platform in the industry.”
At the close of the transaction, Zelnick will continue to serve as Chairman and CEO, and the management team of Take-Two will continue to lead the combined company. Zynga’s management team, led by Frank Gibeau and Zynga’s President of Publishing, Bernard Kim, will drive 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, which will operate under the Zynga brand as its own label within the company. Additionally, Take-Two will expand its Board of Directors to 10 members upon the closing of the transaction to add two members from Zynga’s Board of Directors.