Zynga Stock Soars on Deal to Be Acquired by Take-Two for $12.7 Billion

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Shares of mobile gaming services company

Zynga

were soaring in premarket trading following the news that it will be acquired by

Take-Two Interactive

in a cash-and-stock deal with an enterprise value of $12.7 billion.

Zynga (ticker:

ZNGA

) shares jumped 51.8% to $9.12, while Take-Two (

TTWO

) dropped 7.43% to $152.37.

Under the terms of the deal, Zynga stockholders will receive $8.50 in cash and $6.36 in stock when the transaction closes, for a total of $9.86 per Zynga share. The purchase price is a premium of 64% to Zynga’s closing price on Jan. 7.

“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.

Zelnick will remain CEO of the combined company, while Zynga’s management team will oversee the strategic direction for the company’s mobile efforts. Zynga will retain two new board seats, expanding the current board to 10 members.

Take-Two executives are hoping the acquisition positions the company to capitalize on the gaming industry’s rapid growth, especially in the mobile gaming segment, which is expected to grow by 8% annually over the next three years. Take-Two predicts that mobile will comprise more than 50% of its net bookings in fiscal 2023, compared to 12% in 2022.

Zynga’s portfolio encompasses popular mobile games, including “FarmVille,” “Words With Friends,” “Harry Potter: Puzzles & Spells,” and “Zynga Poker.”

The acquisition is expected to add $100 million in annual cost synergies within the first two years after closing, and at least $500 million of annual net bookings opportunities over time, the companies said. These booking opportunities include creating new mobile games through the addition of Zynga’s intellectual property and mobile developers, optimizing live gaming experiences, and expanding Zynga’s advertising platform and geographic expansion across Asia.

The combined company could deliver a 14% annual growth rate for net bookings through 2024, and $6.1 billion in net bookings for the trailing one-year period ended Sept. 30, 2021.

Take-Two is financing the acquisition through a combination of cash from its balance sheet, a $2.7 billion loan from JPMorgan Chase, and issuance of new debt. The deal is expected to be finalized during the first quarter of Take-Two’s fiscal year ending June 30, 2022.

Write to Sabrina Escobar at [email protected]