Grand Theft Auto maker Take-Two Interactive has agreed to buy Farmville creator Zynga in a shares and cash deal worth about $11 billion.
The deal is one of the biggest ever in the gaming industry and is expected to make Take-Two a leader in mobile gaming.
Take-Two has offered $9.86 per share, representing a 64% premium to the last closing price of Zynga.
Including debt, the deal is worth $12.7 billion.
Under the terms of the agreement Zynga stockholders would receive $3.50 in cash and $6.36 in shares of Take-Two common stock for each share of Zynga common stock outstanding at the closing of the transaction.
Take-Two said it has received committed financing of $2.7 billion from J.P. Morgan for the deal and intends to fund the cash component of the transaction through a combination of cash from its balance sheet as well as proceeds of new debt issuance.
“We are thrilled to announce our transformative transaction with Zynga, which significantly diversifies our business and establishes our leadership position in mobile, the fastest growing segment of the interactive entertainment industry,” said Take-Two chairman and CEO Strauss Zelnick.
“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.
“Zynga also has a highly talented and deeply experienced team, and we look forward to welcoming them into the Take-Two family in the coming months.
“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 $100 million of annual cost synergies within the first two years post-closing and at least $500 million of annual net bookings opportunities over time.”
Zynga CEO Frank Gibeau said: “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.
“I am proud of our team’s hard work to deliver a strong finish to 2021, with one of the best performances in Zynga’s history.
“We are incredibly excited to have found a partner in Take-Two that shares our commitment to investing in our players, amplifying our creative culture, and generating more value for stockholders.
“With this transformative transaction, we begin a new journey which will allow us to create even better games, reach larger audiences and achieve significant growth as a leader in the next era of gaming.”
Strauss Zelnick would continue to serve as chairman and CEO of the combined firm.
Zynga’s management team, led by Frank Gibeau and Zynga’s president of publishing Bernard Kim, will “drive the strategic direction for Take-Two’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.”
Additionally, Take-Two will expand its board of directors to 10 members to add two members from Zynga’s board.
The transaction is subject to the approval of both Take-Two and Zynga stockholders and the satisfaction of customary closing conditions, including applicable regulatory approvals.
The transaction has been unanimously approved by the Take-Two and Zynga boards.
J.P. Morgan and LionTree Advisors are serving as financial advisors to Take-Two and Willkie Farr & Gallagher LLP is serving as legal counsel.
Goldman Sachs & Co. LLC is acting as financial advisor to Zynga and Wilson Sonsini Goodrich & Rosati, Professional Corporation is serving as legal counsel.