Shares of San Francisco-based video game developer Zynga (NASDAQ:ZNGA) are up more than 50% today on news that Take-Two Interactive (NASDAQ:TTWO) is acquiring the company for $12.7 billion.
Take-Two Interactive, which is best known for producing the Grand Theft Auto video games, says it is buying Zynga as part of its expansion into mobile gaming. Zynga is known for the popular FarmVille mobile game and a range of other titles.
Take-Two Interactive is paying $9.86 per share for Zynga, which represents a 64% premium to the last closing price of ZNGA stock.
So what else do you need to know? Here are eight things investors should know about the acquisition and what it potentially means for the video game market.
8 Things to Know About the Deal for ZNGA Stock
- This latest deal comes on the heels of Electronic Arts’ (NASDAQ:EA) $2.4 billion acquisition of Glu Mobile last year. It’s another sign that game developers are looking to beef up their mobile portfolios.
- Take-Two Interactive has received financing of $2.7 billion from JPMorgan Chase (NYSE:JPM) and intends to fund the rest of the $12.7 billion acquisition with cash on hand and proceeds from new debt issuance.
- Take-Two Interactive says that it expects to achieve $100 million in annual cost savings within the first two years after the purchase of Zynga is completed.
- Based in New York City, Take-Two Interactive has developed a number of popular video game franchises, including Red Dead Redemption, BioShock and NBA 2K.
- Zynga’s popular mobile video game titles include Words with Friends, CityVille and Zynga Poker.
- Mobile gaming is the fastest-growing segment within the video game industry, with an estimated $136 billion in 2021 revenues, and a forecast compound annual growth rate (CAGR) of 8% over the next three years, according to Take-Two Interactive.
- Zynga shareholders will receive $3.50 in cash and $6.36 in shares of Take-Two common stock for each share of Zynga common stock that they currently hold.
- The acquisition is still subject to shareholder approval at both companies but is expected to be completed by June 30, 2022.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
