Take-Two Interactive, publisher of video games including Grand Theft Auto, is acquiring Farmville maker Zynga for US$12.7 billion, creating a bulked-up gaming giant, reported Reuters.
Under the deal, Take-Two will acquire all of the outstanding shares of Zynga in a cash-and-stock transaction representing a 64% premium on Zynga’s stock price as of last Friday, January 7. Zynga shares, which have been in a slump over the past year, rocketed almost 50% before the opening bell.
Take-Two is led by Strauss Zelnick, a veteran media and tech executive who became Zynga’s chairman and CEO and the firm’s largest shareholder in a 2007 takeover. The well-connected exec took a turn in the traditional spotlight in 2018, serving as chairman of CBS Corp. and helping steer the media company through its Les Moonves travails en route to its reunion with Viacom.
“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.”
Electronic Arts bought Glu Mobile for US$2 billion last year. Zynga itself has made a string of acquisitions in the past two years, including Echtra and Chartboost.
The mobile gaming sector is expected to reach a market size of US$116.4 billion by 2024, growing at a compound annual growth rate of 11.2% from 2019 to 2024, according to gaming market data firm Newzoo. While the company was viewed as a key beneficiary of stay-at-home trends brought about by COVID-19, its share price has fallen nearly 38% in the past year, with some investors questioning whether the pandemic gaming boom has legs in the long term.
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