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Why Take-Two is shelling out $12 billion to acquire Zynga—and what the gaming giant will look like

January 10, 2022, 4:20 PM UTC

Take-Two Interactive Software will dramatically expand its mobile division with the acquisition of Zynga in a cash and stock deal valued at $12.7 billion.

The deal, which represents a 64% premium to Zynga’s closing price on Friday, will create one of the largest publicly traded interactive entertainment companies in the world. When it’s completed, more than half of the company’s business is expected to come from the mobile space, says Take-Two CEO Strauss Zelnick.

The deal opens the door for some of Take-Two’s giant franchises, which have dominated the PC and console space, to enter the mobile space. Beyond Grand Theft Auto, Take-Two is also behind the NBA 2K franchise, Red Dead Redemption, BioShock, and Borderlands.

“We have a business that is largely a U.S. and Western European business,” said Zelnick in a call discussing the deal. “We’ve had 80% of the world’s geography that is green field for us. The opportunity to address large parts of that geography is with free-to-play, and that’s where Zynga’s expertise lies.”

The deal should allow the company to penetrate high growth areas such as India and Africa, added Zelnick.

Also of special interest to Take-Two is Zynga’s Chartboost, a mobile ad and monetization division. The unit uses machine learning and data science to target an audience and optimize yields.

Zynga and Take-Two declined to say whether other bidders might emerge or have been part of the process so far, only referring investors to paperwork that would be filed in the coming days. Zynga has a 45-day go-shop provision as one of the terms of the deal, an especially long time for this sort of merger.

The combined company will have over 8,000 developers, and the combined companies are expected to have 1 billion combined users.

Zynga shares, predictably, soared in early trading Monday, but Take-Two shares were down 13% as investors digested the news.

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