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Take-Two is looking to leverage its partnership with leading developer Zynga in the video gaming space with this acquisition.
American video game holding company Take-Two Interactive Software (NASDAQ: TTWO) is buying mobile gaming company Zynga (NASDAQ: ZYNGA) for $12.7 billion, according to reports. Pursuant to the deal, Take-Two will procure all outstanding shares of Zynga at $9.86 per piece. This is a 64% premium to the latter’s closing price Friday, as its shares also spiked 49% in US pre-market trade.
Take-Two chief executive officer Strauss Zelnick expressed delight at the development, also highlighting the strengths of both parties. In Zelnick’s own words:
“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.”
Take-Two CEO Strauss Zelnick Will Lead the Combined Company with Zynga
Take-Two will pay $3.50 in cash and $6.36 in Take-Two common stock for each Zynga share. In addition, Zelnick will helm the combined group upon completion of the takeover deal, expected, in the second half of 2022.
Zelnick also expressed optimism at the combined efforts of both platforms increasing value for respective stockholders over a given period of time. As the Take-Two CEO put it:
“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.”
However, even though it is the acquiring party, Take-Two’s stock was about 8.9% lower at $150.00 each. Furthermore, the ‘Grand Theft Auto’ and ‘2 K’ gaming series creator reported pro-forma earnings of $1.63 per share for its fiscal second quarter, which ended in September. In addition, revenue recorded for that same period was about $985 million. Take-Two projects full-year revenue of up to $3.4 billion, with subsequent earnings of up to $4.45 per share. There are several other gaming titles and intellectual property under Take-Two’s extensive and diverse banner. These include ‘Red Dead Redemption,’ ‘Midnight Club,’ ‘Bioshock,’ ‘Borderlands,’ ‘Civilization.’ ‘Kerbal Space,’ and ‘Mafia.’
Zynga is world-renowned for its FarmVille series of mobile gaming titles. The leading developer of mobile and social gaming network platforms was at one point the most successful app developer on Facebook. However, in the ensuing period since that time, Zynga has strived to establish its presence in the smartphone space.
Zynga reportedly benefited hugely from the lockdown period, during the height of the Covid pandemic, which began in 2020. However, the shares of the social game developer have fallen by approximately 38% within the past year. In light of this, some investors are beginning to doubt the longevity potential of the pandemic gaming boom.
Some of Zynga’s other gaming titles are ‘CSR Racing,’ ‘Harry Potter: Puzzles & Spells,’ ‘Toy Blast,’ ‘Merge Dragons’ and ‘Zynga Poker.’