Take-Two’s Acquisition of Zynga
Deal Overview
Announcement date: Monday 10th January
Industry: Video Games
Deal value: $12.7 Billion USD
Deal consideration: Take-Two to acquire all the outstanding shares of Zynga for a total value of $9.861 per share — $3.50 in cash and $6.361 in shares of Take-Two common stock, totalling a value of $12.7 billion.
Acquirer advisors: J.P. Morgan and LionTree Advisors are serving as financial advisors to Take-Two and Willkie Farr & Gallagher LLP is serving as legal counsel.
Target advisors: Goldman Sachs & Co. LLC is acting as financial advisor to Zynga and Wilson Sonsini Goodrich & Rosati, Professional Corporation is serving as legal counsel.
Company Details: Take-Two Interactive
Founded: September 1993
HQ: New York City, United States of America
Market cap: $17.975B
EV: $14.82B
LTM EBITDA: $959M
EV/LTM EBITDA: 15.5
Take -Two Interactive is an American video game holding company based in New York City Large with many subsidiaries. Their portfolio features some of the most successful video-game franchises of all time, including Grand Theft Auto, Red Dead, Bioshock, Borderlands, Civilization and Mafia, as well as sports game franchises like WWE 2K, NBA 2K and PGA Tour 2K. It is the third-largest publicly traded game company in the United States and Europe behind Activision Blizzard and Electronic Arts. According to their 2021 Annual Report Take Two had 6,495 full-time employees as of March 31, 2021.
Company Details: Zynga
Founded: April 2007
HQ: San Francisco, California, United States
Market cap: $10.07B USD
EV: Deal puts the EV at $12.7B USD
LTM EBITDA: N/A
EV/LTM EBITDA: N/A
Zynga is an American social game developer who are best known as the developer of the Facebook game Farmville, Words with Friends and Zynga Poker. In 2020 Zynga had 2245 employees and 134 million monthly active users of their apps.
Strategic Rationale
In a statement made to employees of Take-Two Interactive on 10th January, CEO Strauss Zelnick said, ‘We believe combining our highly complementary businesses and operating at a much larger scale will enable us to deliver significant value to our respective stockholders, including an expected $100 million of annual cost synergies by the end of the second year post-closing and expected annual Net Bookings opportunities of at least $500 million over time.’
Elaborating in a conference call, Zelnick said the acquisition provided, ‘a meaningful opportunity to expand our enterprise further and create value for our players, our colleagues, and especially our stockholders.’ Zelnick continued, ‘This transformative combination will create a powerful and diverse portfolio of industry leading titles that span key platforms and genres across interactive entertainment developed by some of the most creative and forward-thinking talent within the industry.’
The deal makes Take-Two one of the largest players in the mobile games market, the fastest growing section of the video-game market this year.
No doubt Take-Two also aimed to capitalise on the press surrounding the largest acquisition in the history of the video game industry. The previous record holder of course being Microsoft’s acquisition of publishing giant Bethesda for $7.5 Billion, announced in March 2020.
If part of Take-Two’s rationale behind this deal was to make the most of the news, their chance to enjoy it would have been short lived. Microsoft, not content with being outdone, announced an eye-watering $68.7 Billion acquisition of Activision Blizzard on the 18th of January 8 days after Take-Two’s announcement, shaking the industry to the core.
Whilst Microsoft’s industry-changing announcement takes the record for the new largest acquisition, and will no doubt hold it for some time, Take-two’s acquisition of Zynga remains exciting financial news.
Closing Date
The deal is expected to close in the first half of this year. Zynga can legally negotiate with other buyers for a better offer until Feb. 24 but few can outbid the offer of $12.7 Billion.
Analyst: Giles Clift-Simpson
References:
https://ir.take2games.com/static-files/d3e6ee76-ffe2-4976-9b7f-6ffdc25870c1 P16
