Take -Two to acquire top mobile game publiser Zynga for $12.7B

Take-Two Interactive, also known as “Grand Theft Auto” video game maker said on Monday this month that it would buy Zynga for $12.7 billion in a cash-and-stock deal including debt. The deal, the largest ever in the sector, will create a gaming powerhouse with a market cap of nearly $30 billion, spanning console, PC and mobile devices at a time when more people are gaming on their smartphones. The deal is expected to close in the first half of this year. There is also a go-shop period of 45 days, meaning Zynga can negotiate with other buyers for a better offer until Feb. 24.

“It’s a bombshell deal … Zynga was on the list of potential M&A transactions for a long time in the video game business,” said Serkan Toto, CEO of videogame consulting firm Kantan Games.

“Take-Two is looking at the industry map and says ‘we have basically nothing here.’ So, a lot of people have been expecting Take-Two to make a big deal in mobile to close the gap with competitors like Electronic Arts for example.”

Zynga shares surged 45% on Monday, but were still a dollar and change short of the offer price, while Take-Two fell about 15%.

“It is a big price tag for a company that has not consistently produced profits or new blockbusters,” said Erik Gordon, professor at Ross School of Business, University of Michigan.

But with the mobile gaming market likely to reach a size of $116.4 billion by 2024, according to data firm Newzoo, some analysts said more deals were expected in the sector.

“This trend won’t stop here. Many of the console developers are finding out that creating mobile games is difficult,” said D.A. Davidson analyst Franco Granda. Crypto and the metaverse are potential growth opportunities, but mobile gaming is proven to work, he said.

Take-Two expects about $100 million in annual cost savings within the first two years, and more than $500 million in net bookings overtime when the deal closes in mid-2022. JP Morgan and LionTree advised Take-Two while Goldman Sachs advised Zynga on the sale.

Source: Yahoo!finance