Take-Two will acquire Zynga for $12.7B, or $9.86 per share, a 64% premium on Zynga's January 7 closing price; Take-Two develops GTA, Red Dead, and other titles

Sarah E. Needleman / Wall Street Journal :

Wall Street Journal 2022-01-11 Sarah E. Needleman

Context & Ripple Effects

Take-Two had already expanded beyond its core franchises through the Social Point acquisition and its agreement to buy Codemasters. The Zynga agreement is a far larger step in that acquisition-led portfolio buildout.

Later coverage placed the deal near a turning point for casual games, as the post-pandemic mobile-game market began to weaken. That timing makes the premium central to the transaction’s strategic stakes.

First-order effects

Zynga shareholders are offered $9.86 per share, a 64% premium to the January 7 closing price, while Take-Two commits $12.7B to bring Zynga into its business.
Take-Two adds Zynga alongside the businesses it had pursued through Social Point and Codemasters, broadening the set of game properties it controls.

Second-order effects

The size of Take-Two’s Zynga premium raises the bar for other game publishers weighing acquisitions of established game operators.
Integrating Zynga makes Take-Two’s future performance more exposed to the casual-games market that later coverage said was entering a downturn.

Third-order effects

If publishers keep using acquisitions to assemble game portfolios, competitive advantage shifts toward operators able to finance and integrate multiple studios rather than rely on a small number of flagship titles.
The Zynga deal illustrates how market-cycle timing can shape the long-term value of gaming consolidation: a large purchase made near a category peak faces a different operating backdrop after demand cools.

The trend: Game publishers are using acquisitions to diversify beyond flagship franchises, but the payoff increasingly depends on the cycle in the game categories they buy into.

Discussion

@markpinc Mark Pincus on x
I'm excited that Zynga today announced a plan to merge with Take-Two. This has been an amazing 15 year journey. I'd like to share thoughts as I reflect, and why I remain so bullish on gaming. 1/x
@markpinc Mark Pincus on x
We saw the combo of social gaming +big data + virtual goods would change the game industry. We wanted to be the biggest macro bet on social gaming, expanding quickly past Poker to add games like FarmVille, CityVille and Cafe World. 6/x
@markpinc Mark Pincus on x
The key was to make games accessible and social. I thought my mom and sisters would love the guilds in WoW, but knew they would never endure the time and complexity. Games were more fun to play w/ friends and family, but hard to get them in the same place/time 5/x.
@markpinc Mark Pincus on x
Zynga was named after my dog Zinga; Nzinga was an African warrior princess. 3/x https://twitter.com/...
@markpinc Mark Pincus on x
To all my founder peers: this moment feels like a bittersweet victory. I'm thinking of the amazing cast of characters who were a part of this journey. I'm so grateful for the thousands of Zyngites who dedicated themselves to delivering for our players 24x7. 10/x
@zynga @zynga on x
Zynga and Take-Two Interactive have agreed to combine, creating a global leader in interactive entertainment with a portfolio of iconic franchises. https://www.businesswire.com/ ...
@bowknowsbiz @bowknowsbiz on x
Been wondering which company was going to take out Zynga. Looks like Take Two wins it. More dealmaking is on the way I'm sure. https://www.businesswire.com/ ...
@reidhoffman Reid Hoffman on x
As Zynga merges with Take Two, great insights from Mark as he reflects on everything he learned from founding Zynga and helping to pioneer the Internet social gaming space. https://twitter.com/...
@markpinc Mark Pincus on x
I started Zynga in Jan '07 to build a social poker game for Facebook (which had 15m users). We put real people around a table to play with real friends. We launched five months later; it quickly ballooned into the world's largest free poker game. 2/x https://twitter.com/...
@roshancariappa @roshancariappa on x
Zynga was an institution, way ahead of its time. I mean who could imagine monetizing virtual crop and produce in 2008? Then going up against Facebook and getting back up to last 15 years! Fantastic team and vision. https://twitter.com/...
@blader Siqi Chen on x
The 2 years I spent at Zynga were the most formative years of my career and I learned more here than I have anywhere else. Forever grateful to @markpinc for acquiring my first company 12 years ago. https://twitter.com/...
@fwiz Ryan Wyatt on x
Take-Two just bought Zynga for $12.7 billion and are merging the two companies. This is a brilliant move that will benefit the gaming industry greatly. Take-Two has such rich IP across GTA, Borderlands, RDR, and now you couple that with Zynga's F2P and mobile expertise! https://t…
@dwehner Dave Wehner on x
Mark was way ahead of the curve on many fundamental trends in gaming, virtual goods, etc. Beyond that he created a place with a magical level of energy. The opportunity to be a part of it was a life changing experience. https://twitter.com/...
@markpinc Mark Pincus on x
I couldn't capture all of my thoughts on Twitter, so I wrote a longer form of this in a post over at medium. https://medium.com/.... /end
@fredwilson Fred Wilson on x
Zinga was a wonderful dog. I remember when you decided to change the name of the company to Zynga. One of many great decisions Mark. https://twitter.com/...
@paulbz Paul Murphy on x
Not only did @Zynga create a new category of gaming, they also trained many of the industry's best PMs, Engineers, Designers, and Marketers. The entire game industry owes this pioneering business a huge thanks. They're in great hands now with @Dots acquirer TakeTwo. https://twitt…
@markpinc Mark Pincus on x
I showed our iPhone Zynga Poker game to Steve Jobs, and pitched him on allowing in app purchase. He loved the game but said IAPs were a “stupid idea.” (He did get pretty much everything else right :) 8/x
@markpinc Mark Pincus on x
We're seeing games expand in every direction from hyper casual to entire persistent worlds. I believe this company will have the franchises & scale to lead in every category. 12/x https://twitter.com/...
@eric_seufert Eric Seufert on x
3/ Zynga's strategy in its most recent incarnation had been to acquire studios with ascendent titles at a premium, incentivize the teams with very lucrative earnouts, and let them operate completely independently. It worked! I wrote this in 2020 https://mobiledevmemo.com/...
@eric_seufert Eric Seufert on x
10/ Take Two now gets to pair its powerful IP with a constellation of impressive studios (Peak, Gram, Small Giant, etc.) and a DSP (Chartboost). My sense is that Take Two wants to build a unified identity system to manage cross-device play (read: Content Fortress)
@eric_seufert Eric Seufert on x
7/ Zynga was having a hard time selling the Content Fortress story to investors (rightly so: not credible). Other punts, like its shadowboxed move into crypto, were similarly dismissed. Zynga had no compelling strategy moving into 2022 https://venturebeat.com/...
@eric_seufert Eric Seufert on x
8/ Meanwhile, Take Two needed a mobile business. It acquired SocialPoint, based in Barcelona, several years ago, and my understanding was that the team was given the remit to aggregate a much larger business through M&A, but for whatever reason that never happened.
@eric_seufert Eric Seufert on x
5/ Satellite studios are compensated on the basis of their own games; they dont want to give DAU away through cross-promotion. And my understanding is that the satellite studios fought bitterly against any intervention from Zynga HQ
@eric_seufert Eric Seufert on x
9/ Take Two's acquisition of Two Dots earlier last year was interesting if only because the CEO of Two Dots became Take Two's head of mobile. My understanding is that all Take Two mobile now rolls into Zynga, but that's not totally clear https://techcrunch.com/...
@eric_seufert Eric Seufert on x
11/ This is an incredible outcome for Zynga and a very shrewd maneuver for Take Two, which adds 38MM mobile DAUs to its business in a way that potentially can be paired with console users to create a multi-device identity (read: high LTV)
@eric_seufert Eric Seufert on x
6/ According to Sensor Tower, Zynga HQ's titles (social casino portfolio + WWF, FV, etc.) generate only about 40% of total revenues. In order to integrate Chartboost & develop a Content Fortress, Zynga HQ would have needed to re-route the majority of the company's revenue https:/…
@eric_seufert Eric Seufert on x
4/ But that strategy was not workable post-ATT. In order to retrofit itself into a Content Fortress, Zynga was going to need a more robust central org, which is anathema to its previous operating model. The acquisition of Chartboost was brilliant, but how could it be integrated?
@eric_seufert Eric Seufert on x
2/ First, this isnt altogether surprising. The question was always: who is going to pay $10BN+ for the company? EA was out (just acquired Glu), this would fit awkwardly into Activision's portfolio given that they own King, and Chinese acquisitions likely wouldnt get approved
@eric_seufert Eric Seufert on x
Some thoughts on Take Two's acquisition of Zynga in a thread (1/X) $TTWO $ZNGA https://www.cnbc.com/...
@lanceulanoff Lance Ulanoff on x
Big games and little games coming together - https://www.businesswire.com/ ...
@jbillinson Josh Billinson on x
Grand Theft Auto: FarmVille https://twitter.com/...
@nintyprime @nintyprime on x
Just a daily reminder that mobile gaming is massive, way bigger than console and pc gaming. These deal will make the Zenimax deal look like peanuts. Zynga is massive in the mobile space. https://twitter.com/...
@endocrimes Danielle on x
TIL that Zynga: a) still exists b) is somehow worth... 13bn?! https://twitter.com/...
@jasonschreier Jason Schreier on x
It's a no-brainer for Take-Two to get franchises like GTA and Red Dead on mobile. A free-to-play iOS version of GTA Online will make kajillions, and Zynga's got the expertise to develop that. But Take-Two is years late and spent way too much, which may explain market negativity
@mikejmika Mike Mika on x
I can't wait to see what Rockstar does with FarmVille. https://twitter.com/...
@julianklymochko Julian Klymochko.eth on x
$TTWO shares down -10.7% pre-market on the back of its $ZNGA acquisition Note that this deal is subject to a buyside vote, and the acquiror's shareholders DO NOT like this deal Another $MNTV / $ZEN situation? https://www.businesswire.com/ ...
@robmoff Rob Moffat on x
Zynga share price was at half of peak... https://twitter.com/...
@jaredhecht Jared Hecht on x
Strauss Zelnick is one of the greatest leaders out there. You'd be hard pressed to find someone as kind, wise and driven. https://twitter.com/...
@zynga @zynga on x
We're excited to partner with Take-Two, creator of Grand Theft Auto®, Red Dead Redemption®, Midnight Club®, NBA 2K®, BioShock®, Borderlands®, Civilization®, Mafia®, and Kerbal Space Program®. https://www.businesswire.com/ ...
@danprimack Dan Primack on x
Soooo close. Years ago, John Doerr joked on stage with me that “God intended” Zynga to be above $10 per share. The sale price works out to $9.86 per share. https://techcrunch.com/...
@stevekovach Steve Kovach on x
Never thought I'd see the publisher of Grand Theft Auto buy the publisher of Farmville. https://twitter.com/...
@stevekovach Steve Kovach on x
Also, congrats to Take-Two for not using “metaverse” in its press release. https://www.businesswire.com/ ...

Chronicles