‘Grand Theft Auto’ Games Publisher Take-Two Acquires ‘FarmVille’ Maker Zynga for $12.7 Billion

“We really think there’s an opportunity to bring a lot of Take-Two IPs to mobile. And we’re very ambitious in that regard. We haven’t talked about specific titles, of course,” said Take-Two CEO Strauss Zelnick told The Washington Post about the possibility of an original ‘Grand Theft Auto’ mobile game down the line. became available to us only relatively recently. And we are very selective.

The purchase will be made in cash and stock, according to Take-Two. Both companies were already listed on the Nasdaq. Shares of Zynga rose more than 40% on Monday to more than $8 per share, while Take-Two fell about 15% to around $140 per share.

“The stock actually went down significantly today, and there were other times when our stocks went down on a one- or two-day basis, in ways that didn’t make a whole lot of sense. for us. I never argue with the market,” Zelnick said. “Although we’re not cavalier on day trades, not at all, we’re very focused on the long term and we always have it summer. And over the many years of running this business, of course, we have – generally speaking – outperformed the market and outperformed our peers.

Take-Two is financing $2.7 billion of the JP Morgan deal. It will fund the cash portion in part from its own assets and by taking on about $1.2 billion in additional debt, which Zelnick said the company expects to pay off within a few years. The transaction is expected to close by June 30 this year, subject to approval by regulators and shareholders of both companies.

Take-Two also plans to save $100 million by combining the two companies and reducing overhead. Zelnick pointed out that layoffs are “not a starting point” when Take-Two is thinking about cutting costs, and that there are other areas where third-party costs will go down instead.

“This is by far the biggest acquisition we’ve made,” he said. “Our goal is, mainly here in the future, more organic growth. … As long as we stay very disciplined, it should work out. After closing, we will still have a strengthened balance sheet. So certainly we will be able to do more acquisitions.

Prior to acquiring Zynga, Take-Two’s portfolio was primarily console and PC-based, but the deal will expand the business with multiple mobile game hits. Zynga CEO Frank Gibeau said in a statement to The Washington Post that he was thrilled to find a partner who would help “build even better games, reach wider audiences, and achieve meaningful growth.”

Analysts believe the resulting deal will propel Take-Two into the world of mobile gaming.

“It’s a smart move by Zelnick to reposition Take-Two as a games publisher that can cater to the entire market,” said Joost van Dreunen, senior lecturer in games commerce at New York. University Stern School of Business.

Craig Chapple, mobile intelligence strategist at Sensor Tower, noted that mobile games are more profitable than console or PC games alone. The acquisition also adds Zynga’s substantial presence in the international mobile games market; its consumers spent more than $2 billion on its properties last year, six times more than Take-Two’s roughly $330 million in mobile gaming revenue, according to data from Sensor Tower.

The proposed purchase of Zynga is about $4 billion more than Chinese conglomerate Tencent paid for an 81.4% majority stake in Finland’s Supercell – another mobile games maker that developed the Clash of Clans franchise — in 2016. That $9.27 billion deal served as a previous record. for the acquisition of a video game company. In 2020, Microsoft acquired ZeniMax Media, which includes highly regarded game maker Bethesda Softworks, for $8.1 billion. In 2015, Activision Blizzard paid $5.9 billion to acquire King, the mobile game maker behind “Candy Crush.”

Van Dreunen noted that if Activision Blizzard faces multiple lawsuits and government investigations into its corporate culture and allegations of workplace harassment and discrimination, this could be an opportunity for Take-Two to outperform its competitor in the video game industry.

“As Activision Blizzard struggles to retain talent and seeks to counter the acid reflux of its toxic work culture that has soured investor sentiment, Take-Two emerges as an unencumbered, healthier alternative that is on the rise. “, did he declare.

Zelnick said that “to the extent that [Take-Two’s] competitors have issues, it’s going to be something they have to focus on,” and that he had “great respect for [his] peers in the industry. He said Take-Two is very focused on his own challenges and exploiting the opportunities he sees.