Video game company Take-Two has announced plans to acquire social game developer Zynga in a deal worth $12.7bn.
Take-Two will acquire all the outstanding shares of Zynga for a total value of $9.861 per share, in a transaction that represents a 64pc premium to Zynga’s closing share price on 7 January.
The video game industry has experienced rapid growth in the last few years and is estimated to have earned $180bn global revenue in 2020.
Take-Two CEO Strauss Zelnick said the deal will diversify its business and help it establish a leadership position in mobile games, which is the fastest growing segment of the interactive entertainment industry.
“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 $100m of annual cost synergies within the first two years post-closing and at least $500m of annual net bookings opportunities over time.” Zelnick added.
Zynga has a diverse portfolio of popular game franchises such as FarmVille that have been downloaded more than four billion times on mobile. Its CEO Frank Gibeau said this deal will allow the company to begin a new journey to create better games and reach a larger audience.
“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.” Gibeau said.
As part of the transaction, Take-Two has received financing of $2.7bn from investment bank J.P. Morgan and intends to fund the cash component of the transaction through a combination of cash from its balance sheet and proceeds of new debt issuance.
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 deal.
The transaction is expected to complete during the first quarter of Take-Two’s fiscal year 2023 which ends on 30 June 2022. The deal has been unanimously approved by the Take-Two and Zynga boards of directors.
Take-Two’s management will continue to lead the combined company, while Zynga’s team will drive the strategic direction for the company’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.
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