Take-Two Interactive to Buy FarmVille Maker Zynga in $11 Billion Deal


Take-Two Interactive Software Inc.


TTWO -14.34%

agreed to buy

Zynga Inc.


ZNGA 41.92%

in a roughly $11 billion deal as the maker of Grand Theft Auto looks to expand its mobile portfolio with hits like Words With Friends and FarmVille.

The cash-and-stock deal announced Monday is one of the videogame industry’s biggest acquisitions. Take-Two Chief Executive

Strauss Zelnick

said a purchase of Zynga would give it a strong position in mobile, which has been the fastest-growing segment of the global videogame industry in recent years.

“More than 50% of our net bookings will come from mobile upon closing this transaction,” Mr. Zelnick said in an interview with The Wall Street Journal. He added that the combined company will have more than one billion users, creating an opportunity to cross-promote content to a broader audience.

Under the cash-and-stock deal, Zynga stockholders would receive $9.86 for each share they own, including $3.50 in cash and $6.36 of Take-Two stock. The companies said the deal had an enterprise value of $12.7 billion, after adjusting for Zynga’s convertible shares, cash and debt.

The deal, which is expected to close by midyear, represents about a 64% premium to Zynga’s stock price of $6 as of Friday’s close. In midday trading Monday, Zynga shares rose 42% to $8.49, while Take-Two fell 16% to $138.89.

“While one never wants to be cavalier about a decline in their stock price, we are after all judged by our stock price,” Mr. Zelnick said. “We’ve always taken the view that we play for the long term.”

Take-Two is best known for its computer and console game franchises such as Grand Theft Auto and NBA 2K. “Grand Theft Auto V,” launched in 2013, is one of the bestselling videogames of all time. It has sold more than 155 million units world-wide, according to company data.

In recent years, Take-Two has expanded into mobile games through acquisitions of studios Playdots, SocialPoint and Nordeus. Though Zynga started out making browser-based games for

Facebook,

it later shifted its focus to mobile games. Today, its portfolio includes hits such as “CSR Racing” and “Zynga Poker.”

Mr. Zelnick said an attractive part of Zynga is that it has its own advertising platform. It is rare for game makers to have such a platform in-house, as most rely on third parties.

Shares of Zynga fell late last summer as the company took a hit from

Apple Inc.’s

new privacy rules, which make it harder to track users for the purpose of selling targeted advertising. Zynga also reported greater-than-expected audience declines because of easing pandemic restrictions.

More recently, though, the company has shown signs of rebounding. In November, Zynga reported record third-quarter bookings and narrowed its loss, as advertising sales nearly doubled. The company said then that it expects full-year revenue of $2.78 billion and $2.81 billion in net bookings, which was unchanged from the previous quarter.

Take-Two’s most recent earnings report, issued in November, was for its fiscal second quarter and showed modest increases in revenue and net bookings. At that time, the company also raised its outlook for the full fiscal year ending in March, saying it expects revenue in the range of $3.35 billion to $3.45 billion and net bookings of $3.3 billion to $3.4 billion.

On a call with analysts, Mr. Zelnick said he avoided one of the buzzier terms in the videogame space today, the metaverse.

“That’s a word we stayed away from today,” he said in the Journal interview. But he added that Take-Two and Zynga both see opportunities with related technologies such as nonfungible tokens, or NFTs.

“I think both teams are very focused on what Web 3.0 will bring,” he said, referring to another term for the next evolution of the internet.

A tech industry battle is taking shape over the metaverse. WSJ tech reporter Meghan Bobrowsky explains the concept and why tech companies like Facebook, Roblox and Epic Games are investing billions to develop this digital space. Photo: Storyblocks



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