Maker of "Grand Theft Auto" and "Red Dead Redemption," Take-Two Interactive announced on Monday that it is acquiring "FarmVille" and "Words With Friends" creator Zynga in a cash-and-stock deal valued at about $12.7 billion.
The acquisition would bring together a powerhouse in console gaming, Take-Two, with a mobile gaming company with an almost cult-like following.
Zynga shareholders will receive $3.50 in cash and $6.36 in shares of Take-Two common stock for each share of Zynga outstanding stock at closing. The transaction is valued at $9.86 per share of Zynga common stock.
It represents a 64% premium to the last closing price of Zynga. Zynga's shares rose more than 50% in trading before the bell, while those of Take-Two fell nearly 9%.
The deal follows Electronic Arts' $2.4 billion acquisition of Glu Mobile last year as game studios look to build their mobile portfolios.
Many consumers, who were glued to their consoles during the peak of the coronavirus pandemic, have now shifted to mobile gaming as they prefer to play on the go.
"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," Take-Two Chairperson and CEO Strauss Zelnick said in a prepared statement. He will retain those roles when the companies become one.
Take-Two anticipates the deal will help bring about mobile versions of some of its console and personal computer-based games.
The equity value of the deal is $11.04 billion, according to calculations. Including debt, the deal is worth $12.7 billion.
Take-Two has received financing of $2.7 billion from JP Morgan and intends to fund the rest with cash from its balance sheet and proceeds of new debt issuance. It said yesterday it anticipates approximately $100 million in annual cost savings within the first two years after the transaction is complete, and more than $500 million in adjusted revenue over time.
Zynga CEO Frank Gibeau and its president of publishing, Bernard Kim, 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 Take-Two.
Take-Two will also expand its board to 10 members upon closing, adding two members from Zynga’s board.
The transaction includes a go-shop provision, giving Zynga 45 days to hear alternative proposals.
The deal is expected to close during the first quarter of Take-Two’s fiscal year of 2023, ending June 30. It still needs the approval of both Take-Two and Zynga stockholders. It has received approval from both companies' boards.
Shares of Zynga Inc., based in San Francisco, jumped 52.5% to $9.15. Shares of Take-Two Interactive Software, Inc., based in New York City, fell 8.7% to $150.25.