Take-Two Interactive Buys Zynga For IDR 162 Trillion, Biggest Acquisition In World Gaming Industry

"Grand Theft Auto", owned by the world's largest game maker. (photo: doc. unsplash)

JAKARTA - The maker of the video game "Grand Theft Auto", Take-Two Interactive said Monday, January 10, that it will buy Zynga for 11.04 billion US dollars (Rp. 162 trillion) in a cash and stock deal that will add popular mobile titles such as "FarmVille" under its umbrella as a surge in demand for games during the holiday season.

The deal, billed as the largest ever in the gaming sector to date, will create a gaming powerhouse with a market cap of nearly 30 billion US dollars, covering consoles, PCs and mobile devices at a time when more people are playing games on mobile phones. they.

Take-Two, also known as the adventure game "Red Dead Redemption", is offering $3.50 cash and $3,361 shares for each Zynga share, at a premium of 64% over the last closing price. Including debt, the acquisition is worth 12.7 billion US dollars.

"This is a surprising deal ... Zynga is on the list of potential M&A deals for a long time in the video game business," said Serkan Toto, CEO of videogame consulting firm Kantan Games, quoted by Reuters.

"Take-Two looks at the industry map and says 'we basically have nothing here.' So, a lot of people have been expecting Take-Two to make a big deal on mobile to close the gap with competitors like Electronic Arts, for example," added Toto.

Shares of Zynga jumped 45% on Monday, but are still a dollar and off the offer price, while Take-Two is down about 15%.

The deal is expected to be completed in the first half of this year. There's also a 45-day go-shop period, meaning Zynga can negotiate with other buyers for better deals until February 24.

The two companies have held constant talks in the past year, according to sources familiar with the matter.

The final round of negotiations came late last year, when Zynga lost more than a third of its market value, the biggest drop among major game publishers at the time. Zynga has reeled from declining engagement rates and Apple's move to allow iPhone users to opt out of being tracked by advertisers.

"This is a huge price tag for a company that isn't consistently profitable or a new blockbuster," said Erik Gordon, professor at the Ross School of Business, University of Michigan.

But with the mobile games market growing at a rapid pace, likely to reach a size of US$116.4 billion by 2024, according to data firm Newzoo, some analysts said more deals were expected in the sector.

"This trend will not stop here. Many console developers are aware that making mobile games is difficult," said DA Davidson analyst Franco Granda.

Crypto and the metaverse are potential growth opportunities, but mobile gaming is proving to be successful, he said.

Take-Two expects annual cost savings of around $100 million in the first two years, and more than $500 million in net orders over time when the deal closes in mid-2022.