GTA publisher Take-Two to buy Farmville developer Zynga in a $12.7 billion deal

New York-based Take-Two is buying mobile game maker Zynga with a mix of stock and cash valued at an enterprise value of $12.7 billion. Take-Two is most well known for its Grand Theft Auto franchise while Zynga has made several mobile games including the extremely popular Farmville.

Take-Two will acquire the mobile maker at a valuation of $12.7 billion, which will be distributed as $3.50 in cash and $6.361 in shares of Take-Two common stock based on the market close as of January 7, 2022. The purchase price represents a premium of 64% to Zynga’s closing share price on January 7. Zynga still has 45 days to look for a better deal with a different company as part of the ‘Go-Shop provision’.

This deal would create one of the largest publicly traded interactive entertainment companies in the world. With a mix of console, PC and mobile games' expertise, the Take-Two will have a diverse mix of consumers to deal with. Adapting its business plans for different groups of consumers will be one of the foremost challenges for the new company. More importantly, Take-Two hopes to reach new consumer segments across geographical boundaries with this deal. Zynga's market share is primarily in the east where mobile games have a deeper penetration.

Here are some of Take-Two's games.

Zynga, mostly known for its mobile games has several superhits to its name. While Farmville is one of the most popular games in its portfolio, the publisher has several other titles to its name. 

Traded on the NASDAQ, Zynga's stock price peaked in 2012 when it was valued at $14.69 a share. After several years of poor performance, the stock price has seen a jump in the past couple of years.

Mobile gaming has been one of the fastest-growing segments of the gaming industry with revenues outweighing PC and console combined. There is massive projected growth in the near future, especially from Easter countries. This announcement could further cement Take-Two bringing some of its PC and console games to mobile.

The takeover also means Take-Two increases its Recurrent Consumer Spending (“RCS”), which will help the company ensure less income volatility surrounding periods of game releases. 

All of this is still subject to finalization as Zynga and its board of directors may actively solicit, receive, evaluate, and potentially enter negotiations with parties that offer alternative proposals. The Go-Shop clause will be valid till February 24, 2022.

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