Take-Two to acquire all the outstanding shares
of Zynga for a total value of $9.861 per share – $3.50 in cash and
$6.361 in shares of Take-Two common stock, implying an enterprise
value of $12.7 billion
Transaction represents a 64% premium to Zynga’s
closing share price on January 7, 2022
Establishes Take-Two as one of the largest
publishers of mobile games, the fastest-growing segment of the
interactive entertainment industry
Unifies highly complementary businesses,
including Take-Two’s best-in-class portfolio of console and PC
games and Zynga’s industry-leading mobile franchises
Creates one of the largest publicly traded
interactive entertainment companies in the world, with $6.1 billion
in trailing twelve-month pro-forma Net Bookings for the period
ended September 30, 2021
Transaction expected to deliver approximately
$100 million of annual cost synergies within the first two years
after closing, and more than $500 million of annual Net Bookings
opportunities over time
Conference call to discuss the transaction is
scheduled for this morning at 8AM ET
Take-Two Interactive (NASDAQ: TTWO) (the “Company”) and Zynga
(NASDAQ: ZNGA), two leaders in interactive and mobile
entertainment, today announced that they have entered into a
definitive agreement, under which Take-Two will acquire all of the
outstanding shares of Zynga in a cash and stock transaction valued
at $9.861 per Zynga share, based on the market close as of January
7, 2022, with a total enterprise value of approximately $12.7
billion. Under the terms and subject to the conditions of the
agreement, Zynga stockholders will receive $3.50 in cash and $6.361
in shares of Take-Two common stock for each share of Zynga common
stock outstanding at the closing of the transaction. The purchase
price represents a premium of 64% to Zynga’s closing share price on
January 7, 2022.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20220110005389/en/
Strauss Zelnick, Chairman and CEO of
Take-Two (Photo: Business Wire)
This transformative combination unifies two global leaders in
the interactive entertainment business and establishes Take-Two as
one of the largest and most diversified mobile game publishers in
the industry, with $6.1 billion in pro-forma Net Bookings for the
trailing twelve-month period ended September 30, 2021.
Both companies have created and expanded iconic franchises,
which will combine to form one of the largest and most diverse
portfolios of intellectual properties in the sector. Take-Two’s
labels are home to some of the most beloved series in the world,
including Grand Theft Auto®, Red Dead Redemption®, Midnight Club®,
NBA 2K®, BioShock®, Borderlands®, Civilization®, Mafia®, and Kerbal
Space Program®, while Zynga’s portfolio includes renowned titles,
such as CSR Racing™, Empires & Puzzles™, FarmVille™, Golf
Rival™, Hair Challenge™, Harry Potter: Puzzles & Spells™, High
Heels! ™, Merge Dragons!™, Toon Blast™, Toy Blast™, Words With
Friends™, and Zynga Poker™.
Management Comments
“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 Strauss Zelnick,
Chairman and CEO of Take-Two. “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.”
“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,” said Frank Gibeau, CEO of Zynga. “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.”
Strategic Rationale and Stockholder
Value Creation
With Zynga’s stockholders receiving approximately 64.5%1 of the
transaction consideration in Take-Two stock, both groups of
stockholders will benefit from the combined company’s greater
scale, enhanced financial profile, and the synergies created
through the transaction.
Combined company is well-positioned to capitalize on the
interactive entertainment industry’s strong tailwinds, including a
leadership position in mobile. The video game sector has
experienced rapid growth over the last few years and is now the
largest vertical in the entertainment industry2. Mobile gaming is
the fastest growing segment within the industry, with an estimated
$136 billion2 in gross bookings in 2021, and an expected compound
annual growth rate of 8%2 over the next three years. The
transaction is expected to establish Take-Two as a leader in mobile
gaming, with mobile expected to comprise over 50% of its Net
Bookings in Fiscal Year 2023 (as compared to an estimated 12% in
Fiscal Year 2022). The transaction will bolster Take-Two’s mobile
offerings, which include popular games such as Dragon City, Monster
Legends, Top Eleven, Two Dots, and WWE SuperCard, and consist of a
diverse array of titles that focus on many of the most popular
genres in mobile gaming, including casual, hyper-casual, lifestyle,
mid-core, puzzle, social casino and sports games.
Formation of an industry-leading portfolio, comprising
Take-Two’s best-in-class intellectual properties and Zynga’s
renowned mobile titles. The transaction will create a powerful
and diverse portfolio of industry-leading titles that span key
platforms and genres across interactive entertainment, developed by
some of the most creative and forward-thinking talent within the
industry. By sharing best practices and key data insights across
the enterprise, the Company is expected to benefit from significant
development and publishing synergies, unlock new revenue streams
and reach new audiences around the world.
The combined entity has significantly greater scale, with
$6.1 billion in Net Bookings, and $769 million3 in Adjusted
Unrestricted Operating Cash Flow on a pro-forma basis for the
trailing twelve-month period ended September 30, 2021. Looking
ahead, the combined company is expected to deliver a 14%4 compound
annual growth rate for Net Bookings (excluding the annual Net
Bookings opportunities and any future acquisitions) over the
three-year period from Take-Two’s Fiscal Years 2021 through
2024.
Addition of Zynga’s mobile titles will expand the Company’s
base of Recurrent Consumer Spending (“RCS”). Through the
addition of Zynga’s mobile business, particularly its diversified
portfolio of live services and upcoming pipeline of new releases,
Take-Two will increase its sources of RCS, a highly-attractive
revenue stream that helps reduce volatility across reporting
periods that has historically been driven by the cadence of
Take-Two’s console and PC release slate.
Take-Two has also identified over $500 million of incremental
annual Net Bookings opportunities to unlock over time, driven
by:
Creation of new mobile games for many of
the iconic franchises within Take-Two’s portfolio of intellectual
property. Take-Two has an extensive catalog of commercially and
critically successful console and PC titles with engaged and loyal
communities of players, and there is a meaningful opportunity to
create mobile games and new cross-platform experiences for many of
these properties. Zynga’s nearly 3,000 employees include
highly-talented mobile developers, paving the way for Take-Two to
accelerate this strategic initiative and introduce its iconic
intellectual properties across the fastest-growing platform in the
industry.
Ability to optimize RCS by leveraging the
collective knowledge across both companies. Both Take-Two and
Zynga have extensive capabilities to engage players through live
operations (“LiveOps”) and RCS initiatives. By combining resources
and proven acumen, the teams at Take-Two and Zynga will deploy
best-in-class practices throughout the organization to enhance and
grow existing titles across the portfolio. Key opportunities
include cross-marketing through a larger, shared customer database
and improving game economies through more effective data analytics
and machine learning models.
Other strategic benefits include the
use of Zynga’s Chartboost advertising platform, which will improve
new user acquisition through better audience targeting and optimize
mobile advertising inventory to achieve greater yields; geographic
expansion into growth markets across Asia, including India, and the
Middle East, among other regions; and an enhanced focus on
technological innovation and new business models that will utilize
the collective knowledge of forward-thinking talent.
Take-Two expects approximately $100 million of annual cost
synergies within the first two years after closing, primarily
driven by the rationalization of duplicative overhead including
corporate general and administrative expenses and public company
costs, as well as the benefit of scale efficiencies across the
enterprise.
The acquisition is structured to maintain a strong balance
sheet, including significant annual cash generation. The
combined company’s strategic and financial flexibility is expected
to be greater than each company on a standalone basis, providing
Take-Two with the financial resources to continue to invest in
talent, development, and innovation, while also pursuing select
inorganic growth opportunities.
Leadership
At the close of the transaction, Strauss Zelnick will continue
to serve as Chairman and CEO, and the management team of Take-Two
will continue to lead the combined company. Zynga's highly skilled
and proven 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 upon the closing of the
transaction to add two members from Zynga’s Board of Directors.
Terms of the Acquisition
Zynga stockholders will receive $3.50 in cash and $6.361 in
shares of Take-Two common stock for each share of Zynga common
stock outstanding at the closing. The transaction is valued at
$9.861 per share of Zynga common stock based on the market closing
as of January 7, 2022, implying an enterprise value of
approximately $12.7 billion.
The transaction includes a collar mechanism on the equity
consideration, so that if Take-Two’s 20-day volume weighted average
price (“VWAP”) ending on the third trading day prior to closing is
in a range from $156.50 to $181.88, the exchange ratio would be
adjusted to deliver total consideration value of $9.86 per Zynga
share (including $6.36 of equity value based on that VWAP and $3.50
in cash). If the VWAP exceeds the higher end of that range, the
exchange ratio would be 0.0350 per share, and if the VWAP falls
below the lower end of that range, the exchange ratio would be
0.0406 per share.
Within the collar range, the final number of Take-Two shares
estimated to be issued on a fully diluted basis will range between
approximately 50.3 million and 58.5 million shares. Upon closing of
the transaction, current Take-Two stockholders will own between
67.2% and 70.4% and current Zynga stockholders are expected to own
between 29.6% and 32.8% of the combined company on a fully diluted
basis, respectively, including the shares associated with expected
settlement of Zynga’s two outstanding series of convertible notes
due 2024 and 2026.
As part of the transaction, Take-Two has received committed
financing of $2.7 billion from J.P. Morgan 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.
The merger agreement provides for a “go-shop” provision under
which Zynga and its Board of Directors may actively solicit,
receive, evaluate, and potentially enter negotiations with parties
that offer alternative proposals during a 45-day period following
the execution date of the definitive agreement, expiring on
February 24, 2022. There can be no assurance this process will
result in a superior proposal. Zynga does not intend to disclose
developments about this process unless and until its Board of
Directors has made a decision with respect to any potential
superior proposal.
1Within a 7.5% symmetrical collar based on a Take-Two share
price of $169.19 as the midpoint. 2 Source: IDG Consulting. 3 Based
on the trailing twelve-month period ended September 30, 2021.
Combines Take-Two’s Adjusted Unrestricted Operating Cash Flow of
$467 million and Zynga’s Operating Cash Flow of $302 million. 4 Due
to different fiscal year ends, appropriate modifications were made
to calculate information based on Take-Two’s fiscal year end.
Approvals and Close
Timing
The transaction, which is expected to be completed during the
first quarter of Take-Two’s Fiscal Year 2023, ending June 30, 2022,
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 of Directors. Moreover, each director and
executive officer of Take-Two and Zynga have entered into voting
agreements to support the transaction.
Advisors
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.
Transaction Conference Call and
Supplemental Materials
Take-Two and Zynga will host a conference call today at 8:00
a.m. Eastern Time to review the transaction and host a question and
answer session. The call can be accessed by dialing (877) 407-0984
or (201) 689-8577. A live listen-only webcast of the call will be
available by visiting http://ir.take2games.com. During the conference
call and webcast, management will review a presentation summarizing
the transaction, which can be accessed at
http://t2mobile.take2games.com. All materials will be available
following the call at the same location.
Operational Metric – Net
Bookings
Net Bookings is defined as the net amount of products and
services sold digitally or sold-in physically during the period,
and includes licensing fees, merchandise, in-game advertising,
strategy guides and publisher incentives.
Non-GAAP Financial
Measure
In addition to reporting financial results in accordance with
U.S. generally accepted accounting principles (GAAP), the Company
uses a Non-GAAP measure of financial performance: Adjusted
Unrestricted Operating Cash Flow, which is defined as GAAP net cash
from operating activities, adjusted for changes in restricted cash.
The Company’s management believes it is important to consider
Adjusted Unrestricted Operating Cash Flow, in addition to net cash
from operating activities, as it provides more transparency into
current business trends without regard to the timing of payments
from restricted cash, which is primarily related to a dedicated
account limited to the payment of certain internal royalty
obligations. This Non-GAAP financial measure is not intended to be
considered in isolation from, as a substitute for, or superior to,
GAAP results. This Non-GAAP financial measure may be different from
similarly titled measures used by other companies. In the future,
Take-Two may also consider whether other items should also be
excluded in calculating this Non-GAAP financial measure used by the
Company. Management believes that the presentation of this Non-GAAP
financial measure provides investors with additional useful
information to measure Take-Two's financial and operating
performance. In particular, this measure facilitates comparison of
our operating performance between periods and may help investors to
understand better the operating results of Take-Two. Internally,
management uses this Non-GAAP financial measure in assessing the
Company's operating results and in planning and forecasting.
About Take-Two Interactive
Software
Headquartered in New York City, Take-Two Interactive Software,
Inc. is a leading developer, publisher, and marketer of interactive
entertainment for consumers around the globe. We develop and
publish products principally through Rockstar Games, 2K, Private
Division, and T2 Mobile Games. Our products are designed for
console systems, personal computers, and mobile, including
smartphones and tablets, and are delivered through physical retail,
digital download, online platforms, and cloud streaming services.
The Company’s common stock is publicly traded on NASDAQ under the
symbol TTWO. For more corporate and product information please
visit our website at http://www.take2games.com.
About Zynga
Zynga is a global leader in interactive entertainment with a
mission to connect the world through games. With massive global
reach in more than 175 countries and regions, Zynga has a diverse
portfolio of popular game franchises that have been downloaded more
than four billion times on mobile including CSR Racing™, Empires
& Puzzles™, FarmVille™, Golf Rival™, Hair Challenge™, Harry
Potter: Puzzles & Spells™, High Heels!™, Merge Dragons!™, Merge
Magic!™, Toon Blast™, Toy Blast™, Words With Friends™ and Zynga
Poker™. With Chartboost, a leading mobile advertising and
monetization platform, Zynga is an industry-leading next-generation
platform with the ability to optimize programmatic advertising and
yields at scale. Founded in 2007, Zynga is headquartered in
California with locations in North America, Europe and Asia. For
more information, visit www.zynga.com or follow Zynga on Twitter,
Instagram, Facebook or the Zynga blog.
All trademarks and copyrights contained herein are the property
of their respective holders.
Additional Information About the
Proposed Acquisition and Where to Find It
This communication relates to a proposed business combination of
Take-Two and Zynga that will become the subject of a registration
statement on Form S-4 to be filed by Take-Two with the U.S.
Securities and Exchange Commission (the “SEC”), which will include
a joint proxy statement/prospectus. The registration statement on
Form S-4, including the joint proxy statement/prospectus, will
provide full details of the proposed combination and the attendant
benefits and risks. This communication is not a substitute for the
registration statement on Form S-4, including the joint proxy
statement/prospectus, or any other document that Take-Two or Zynga
may file with the SEC or send to their respective stockholders in
connection with the proposed combination. Investors and security
holders are urged to read the registration statement on Form S-4,
including the definitive joint proxy statement/prospectus, and all
other relevant documents filed with the SEC or sent to Take-Two’s
or Zynga’s stockholders as they become available because they will
contain important information about the proposed combination.
All documents, when filed, will be available free of charge at the
SEC’s website (www.sec.gov). You may also obtain these documents by
contacting Take-Two’s Investor Relations department at
contact@take2games.com; or by contacting Zynga’s Investor Relations
department at investors@zynga.com. This communication does not
constitute an offer to sell or the solicitation of an offer to buy
any securities or a solicitation of any vote or approval.
Participants in the
Solicitation
Take-Two, Zynga and their respective directors and executive
officers may be deemed to be participants in any solicitation of
proxies in connection with the proposed business combination.
Information about Take-Two’s directors and executive officers is
available in Take-Two’s proxy statement dated July 27, 2021 for its
2021 Annual Meeting of Stockholders. Information about Zynga’s
directors and executive officers is available in Zynga’s proxy
statement dated April 5, 2021 for its 2021 Annual Meeting of
Stockholders. Other information regarding the participants in the
proxy solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained in
the registration statement on Form S-4, including the joint proxy
statement/prospectus, and all other relevant materials to be filed
with the SEC regarding the proposed combination when they become
available. Investors should read the registration statement on Form
S-4, including the joint proxy statement/prospectus carefully when
it becomes available before making any voting or investment
decisions.
Cautionary Note Regarding
Forward-Looking Statements
Statements contained herein which are not historical facts may
be considered forward-looking statements under federal securities
laws and may be identified by words such as "anticipates,"
"believes," "estimates," "expects," "intends," "plans,"
"potential," "predicts," "projects," "seeks," “should,” "will," or
words of similar meaning and include, but are not limited to,
statements regarding the proposed business combination of Take-Two
and Zynga and the outlook for Take-Two’s or Zynga’s future business
and financial performance. Such forward-looking statements are
based on the current beliefs of Take-Two’s and Zynga’s respective
management as well as assumptions made by and information currently
available to them, which are subject to inherent uncertainties,
risks and changes in circumstances that are difficult to predict.
Actual outcomes and results may vary materially from these
forward-looking statements based on a variety of risks and
uncertainties including: the occurrence of any event, change or
other circumstances that could give rise to the termination of the
merger agreement; the inability to obtain Take-Two’s or Zynga’s
respective stockholder approval or the failure to satisfy other
conditions to completion of the proposed combination, including
receipt of regulatory approvals, on a timely basis or at all; risks
that the proposed combination disrupts each company’s current plans
and operations; the diversion of the attention of the respective
management teams of Take-Two and Zynga from their respective
ongoing business operations; the ability of either Take-Two, Zynga
or the combined company to retain key personnel; the ability to
realize the benefits of the proposed combination, including net
bookings opportunities and cost synergies; the ability to
successfully integrate Zynga’s business with Take-Two’s business or
to integrate the businesses within the anticipated timeframe; the
outcome of any legal proceedings that may be instituted against
Take-Two, Zynga or others following announcement of the proposed
combination; the amount of the costs, fees, expenses and charges
related to the proposed combination; the uncertainty of the impact
of the COVID-19 pandemic and measures taken in response thereto;
the effect of economic, market or business conditions, including
competition, consumer demand and the discretionary spending
patterns of customers, or changes in such conditions, have on
Take-Two’s, Zynga’s and the combined company’s operations, revenue,
cash flow, operating expenses, employee hiring and retention,
relationships with business partners, the development, launch or
monetization of games and other products, and customer engagement,
retention and growth; the risks of conducting Take-Two’s and
Zynga’s business internationally; the impact of changes in interest
rates by the Federal Reserve and other central banks; the impact of
potential inflation, volatility in foreign currency exchange rates
and supply chain disruptions; the ability to maintain acceptable
pricing levels and monetization rates for Take-Two’s and Zynga’s
games; and risks relating to the market value of Take-Two’s common
stock to be issued in the proposed combination.
Other important factors and information are contained in
Take-Two’s and Zynga’s most recent Annual Reports on Form 10-K,
including the risks summarized in the section entitled “Risk
Factors,” Take-Two’s and Zynga’s most recent Quarterly Reports on
Form 10-Q, and each company’s other periodic filings with the SEC,
which can be accessed at www.take2games.com in the case of
Take-Two, http://investor.zynga.com in the case of Zynga, or
www.sec.gov. All forward-looking statements are qualified by these
cautionary statements and apply only as of the date they are made.
Neither Take-Two nor Zynga undertakes any obligation to update any
forward-looking statement, whether as a result of new information,
future events or otherwise.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220110005389/en/
TAKE-TWO:
(Investor Relations) Nicole Shevins Senior Vice President
Investor Relations & Corporate Communications Take-Two
Interactive Software, Inc. (646) 536-3005
Nicole.Shevins@take2games.com
(Corporate Press) Alan Lewis Vice President Corporate
Communications & Public Affairs Take-Two Interactive
Software, Inc. (646) 536-2983 Alan.Lewis@take2games.com
ZYNGA:
(Investor Relations) Rebecca Lau Vice President Investor
Relations & Corporate Finance Investors@zynga.com
(Corporate Press) Kenny Johnston Director Communications
Press@zynga.com
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