Take-Two Interactive Software, Inc. to Combine with Zynga, Inc.

Key insights

7 takeaways

01
Take-Two Interactive will acquire Zynga in a cash-and-stock transaction valued at approximately $12.7 billion, representing a 64% premium over Zynga’s January 7, 2022, closing price.See it on page 17
02
The merger combines Take-Two’s console and PC franchises, such as Grand Theft Auto, with Zynga’s mobile free-to-play titles to create a diversified portfolio across platforms.See it on page 8
03
The combined entity projects net bookings to exceed $6 billion in fiscal year 2023, with an expected three-year compound annual growth rate of 14%.See it on page 18
04
Management anticipates $6.1 billion in cost synergies and expects adjusted unrestricted operating cash flow to increase from $1.2 billion in FY21 to $1.5 billion by FY24.See it on page 18
05
Take-Two has secured $2.7 billion in debt financing to cover the cash portion of the deal, which is expected to close in the first quarter of fiscal year 2023.See it on page 17
06
The transaction aims to leverage Zynga’s mobile advertising platform and player database to accelerate user acquisition and enhance cross-platform monetization.See it on page 10
07
Take-Two will expand its board of directors to ten members, incorporating two representatives from Zynga to oversee the combined operations.See it on page 17

Summary

The communication announces a proposed business combination in which Take-Two Interactive Software, Inc. will acquire Zynga, Inc. for an enterprise value of approximately $12.7 billion, paying $3.50 in cash and 6.36 shares of Take-Two common stock per Zynga share, representing a 64% premium to Zynga’s closing price on January 7, 2022. The transaction is structured as a cash-and-stock deal and is expected to close in the first quarter of fiscal year 2023, subject to shareholder approval and customary closing conditions. Take-Two has secured $2.7 billion in debt financing to fund the cash portion and will retain a strong balance sheet with significant liquidity.

The combined entity aims to create one of the largest interactive entertainment portfolios, blending Take-Two’s console and PC franchises such as Grand Theft Auto and Red Dead Rebellion with Zynga’s leading mobile free-to-play titles, including CSR Racing, Merge Dragons and Harry Potter: Puzzles & Spells. Management projects net-booking growth of 2.6% to 2.8% annually through FY24, with cost synergies of roughly $6.1 billion and a three-year compound annual growth rate of 14% for the combined net bookings. The merger is expected to diversify revenue streams, enhance cross-platform monetization, and leverage Zynga’s mobile advertising platform and player database to accelerate user acquisition.

Key financial highlights include Take-Two’s FY21 net bookings of $2.929 billion and Zynga’s $2.270 billion, with combined FY23 net bookings projected to exceed $6 billion. Adjusted unrestricted operating cash flow is expected to rise from $1.2 billion in FY21 to $1.5 billion by FY24, reflecting the combined company’s improved cash generation capacity. The announcement also outlines governance changes: Take-Two will expand its board to ten members, adding two Zynga directors. Overall, the combination seeks to deliver scale, diversified intellectual property, and enhanced profitability in a rapidly growing mobile gaming market.